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S&P: Turkey, Dubai vying to be new world centers for sukuk

February 5, 2014

ISTANBUL (CIHAN)- The global credit rating agency Standard and Poor's (S&P) has stated that Turkey and Dubai are working hard to become new centers in the world sukuk market, following the example of Malaysia's achievements in this field of Islamic fundraising. In a bulletin on Tuesday, S&P said the outlook for the sukuk market appears to be very promising in 2014 after a chaotic 2013, when sukuk issuance was down by 13 percent on an annual basis compared to a year before. S&P expects the sukuk market to expand this year and will likely exceed $100 billion in size, especially with the help of corporate and infrastructure enterprises in the Gulf region. The S&P bulletin said the global growth in sukuk issuance could grow by double digits for two years. "However, we believe the Fed's move to taper its quantitative easing program could influence issuance through a shift toward local currencies from dollar-denominated issuances," it said. "Despite some headwinds, Standard & Poor's Ratings Services believes the long-term prospects for the sukuk industry remain promising as regulators continue to build and strengthen their frameworks to minimize barriers in the market and deepen liquidity," it added. S&P said two regions particularly stand out as significant actors in sukuk issuance; one is Asia , with Malaysia at the center and the other is the Gulf Cooperation Council (GCC) region. In addition, Dubai and Turkey have recently been sending positive signals of gradually rising as new centers for Islamic finance by attempting to create a good sukuk framework. It also drew attention to the adoption of a new set of regulations in Hong Kong concerning the sukuk market there, concluding that these steps are being taken in the course of advancing and improving the supply and demand characteristics of the global sukuk market. Qatar's Islamic banks continue to maintain strong credit growth and the S&P bulletin said, "We anticipate that they will become more active issuers of sukuk over the next few years." S&P calculated that the demand for sukuk from GCC corporate and infrastructure issuers will continue to grow by 17 percent in 2014, having reaching an estimated $28.2 billion in 2013. It also said the prospects for 2014 will largely depend on the direction of interest rates, and to a lesser extent on the relative attractiveness and pricing of other forms of conventional financing when compared with sukuk. Based on the assumption that oil prices will continue to hover above $100 per barrel through most of the year, S&P predicted that the Gulf countries will retain positive economic expectations, which indicate more lending and balance-sheet growth opportunities for their banks. The agency argued that the GCC countries will continue using the sukuk issuance in their local currencies as an instrument to advance their local capital markets. (Cihan/Today's Zaman) CIHAN

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Source: Cihan News Agency (Turkey)

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