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Global sukuk market to halve as major issuer pulls out

The global sukuk market may halve in 2015 after one of the market's biggest issuers pulled back this year, Gulf News reported.10 Jul 2015

A Standard and Poor's report found that a decision by Malaysia's central bank, Bank Negara Malaysia (BNM), to stop issuing sukuk, or Islamic bonds, could see the market fall to $50-$60 billion in 2015 from $100-$115 billion in 2014, Gulf News said.

In the first half of the year issuance dropped by 42.5% compared to the same period a year earlier, despite the fact that the market was helped by returning sovereign issuers and large issuances from banks and non-financial companies in the Gulf states and Malaysia, Gulf News reported.

In 2014, BNM issued $45bn of the total $116.4bn, Gulf News said.

"We understand part of the reason behind BNM’s decision was that its sukuk were subscribed to by a broad array of investors, preventing them from reaching their intended end-users (primarily Malaysian Islamic banks for liquidity management purposes)," Mohammad Damak, head of Islamic finance at Standard and Poor's said, according to Gulf News.

The number of potential sukuk issuers globally continues to increase, the report said, but the timing of their issuance is uncertain.

In October 2014, BNM’s governor said the $270bn global market for sukuk could become an "important source of funding" for infrastructure and other long-term projects.

In May, Bloomberg data suggested that Malaysian sukuk issuance in April had been 24% up on March, at billion ringit (US$3.1bn).

In January the Dubai-based AlHuda Centre of Islamic Banking and Economics predicted that Islamic banking and finance will exceed $2.5 trillion of assets in 2015 as the industry moves into new markets.

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