Longer maturity Islamic papers continue to be the star of the global Sukuk market, outshining shorter-term Sukuk so far in the year. VINEETA TAN writes.
The Dow Jones Sukuk 7-10 Year Total Return Index was up by 6.26% year-to-date as at the 17th August 2017, outperforming the three-five year benchmark and one-three year index which recorded gains of 2.69% and 1.9% respectively.
Michele Leung, the director of fixed income indices at S&P Dow Jones Indices, wrote this week that the trend has been consistent in the past few years.
On the other hand, the US dollar investment-grade Sukuk market is steady on its expansion track. According to Leung, the Dow Jones Sukuk Total Return Index (ex-Reinvestment) is tracking 20% more Sukuk papers year-to-date at 73 Sukuk with a market value of US$74 billion. The index is up 3.65% since the 1st January 2017.
“A total of 11 Sukuk with a total outstanding par of US$19 billion were added to the index so far this year, which surpassed the US$16.75 billion of new additions in 2016,” Leung noted.
The growth of the dollar Sukuk space is driven by the new issuances by sovereigns in the Middle East and Asia such as Saudi Arabia, Oman and Indonesia as well as Hong Kong. The local currency space is also developing apace with the likes of Indonesia issuing Sukuk consistently to fund its national infrastructure projects and Saudi Arabia lining up its second riyal Sukuk facility part of an unlimited program.
Table 1: Index performance comparison | |||||
Total returns | Index level | One day | MTD | QTD | YTD |
Dow Jones Sukuk 1-3 Year Total Return Index | 163.23 | 0.05% | 0.27% | 0.62% | 1.91% |
Dow Jones Sukuk 3-5 Year Total Return Index | 149.31 | 0.09% | 0.42% | 0.57% | 2.75% |
Dow Jones Sukuk 7-10 Year Total Return Index | 146.25 | 0.13% | 0.81% | 1.2% | 6.6% |
Dow Jones Sukuk Investment Grade Total Return Index | 116.81 | 0.11% | 0.5% | 0.84% | 3.81% |
Source: S&P Dow Jones Indices as of the 21st August 2017 |