The corporate sukuk markets in the GCC and Malaysia are backed by essential infrastructure funding requirements, low interest rates, and investors' appetite for Islamic assets in their portfolios, according to S&P Global Ratings.
However, corporate and infrastructure sukuk issuance continued to stagnate so far this year.
S&P sees possible brighter prospects for issuing corporate and infrastructure sukuk over the medium to long term, the statement said, adding that Gulf government spending on projects alone--including infrastructure contracts awarded over 2016-2019—is expected to reach about $330 billion.
“We note that with some sovereigns, such as Saudi Arabia, the 2016 budget includes a capital spending allocation of about 9% for what the government defines as "transport and infrastructure." This compares with our estimates of about $604 billion in projects (including $100 billion of infrastructure projects) that will need funding through 2019”, the ratings agency noted.
In the GCC, corporate and sukuk issuance totaled $2.5 billion in the first eight months of 2016, compared with $2.3 billion for the preceding eight months. Global corporate and infrastructure sukuk issuance was also sluggish over the same period, standing at $10.8 billion compared with $13.6 billion in the first eight months of 2015.
S&P estimated that about $50 billion will be allocated specifically for infrastructure (including transport-related projects). This compares with our estimates of about $604 billion in projects (including $100 billion of infrastructure projects) that will need funding through 2019.
Among Saudi Arabia's key projects in pre-execution are the $15 billion Al Mozaini Riyadh East Sub Center in Riyadh. In the city of Mecca, an $8 billion project for metro lines B and C is to be awarded to help transport pilgrims around the city.
In the UAE, Dubai World Central, the extension of Al Maktoum International Airport, is currently budgeted at $32 billion. The Al Gharbia Chemicals Industrial City in Abu Dhabi is another project and planned at $20 billion. Dubai is also pressing ahead with key projects ahead of Expo 2020 Dubai.
Qatar's projects are in pre-execution phase and include QRail, a rail connection between Qatar and neighboring countries ahead of the 2022 FIFA World Cup. Kuwait's main projects in pre-execution are refinery projects--all related to Kuwait National Petroleum Co.
