KUALA LUMPUR, Dec 8 (Bernama) — The global Islamic capital market’s growth next year is hinged on the pace of policy revisions by major central banks and stable sukuk issuances, said Standard and Poor (S&P) Global Ratings Islamic Finance Global Head Dr Mohamad Damak.
He said that supported by global economic recovery as well as strong sukuk issuance, the Islamic finance industry is expected to expand between 10 per cent and 12 per cent for next year as well as 2021.
Even though certain countries growth rates are expected to be low, there is a definite recovery expectation for 2022 and this recovery will be consolidated.
Economic recovery will be the key driver impacting growth, with strong financing growth in Saudi Arabia, particularly in mortgages and corporate lending, investment in Qatar ahead of the 2022 FIFA World Cup, he said in a special presentation in conjunction with the second day of Islamic Capital Market Summit 2021.
Turkey’s growth will be at a slower pace and driven primarily by public sector participation banks, said Damak.
Continuous growth in Malaysia’s sukuk issuance are additional factors supporting the global Islamic financial market and there will be some sovereign funds tapping the sukuk market more aggressively and move away from the conventional debt market, he said.
He said that economic recovery in core Islamic finance countries is spurred by higher oil prices and the higher oil price will lead to a bigger fiscal space for the Gulf Cooperation Council.
However, investors would continue to invest in development-related projects, which gives investors some moderate assurance.
At present, the total assets of the Islamic finance industry stood at US$2.2 trillion (US$1=RM4.22).
On the down risks, Damak said the Islamic capital market is vulnerable to the evolution of the pandemic and the risk of central bank policies, which could affect global liquidity and business expansion.
If we were to see a steeper and quicker increase in interest rates, more than what we expect, it will influence the industrys growth.
Apart from that, traditional concerns such as geopolitical conflicts and fluctuations in oil prices can also put the sector at risk, he added.
Commenting on this years performance, Damak said S&P has estimated that the overall volume of issuance would be around US$140 to US$155 billion in 2021 from US$139.8 billion in 2020.
He added that as at Sept 30, 2021, the overall issuance volume was down by 2.7 per cent but the foreign currency issuance was up due to strong liquidity, low-interest rates, and some issuers returning to the market.
Meanwhile, he said the fund industry is expected to register some growth as investors chase yield, while the takaful industry is projected to expand between five and 10 per cent.
TAGS: Islamic finance, sukuk, Islamic capital market, issuance, S&P