Blog: You, us, everyone

As of today, the global Sukuk market reaches a market volume of over $725 billion. The main issuers are governments, corporations with strong financing requirements, as well as corporations with international reach. 

On the back of high energy out prices, we expect that the new government financing requirements will be limited in the coming years. This applies most likely unilaterally to all GCC countries. Bahrain is expected to benefit less from high oil prices but still its credit quality is good.
Going forward: Most Sukuk issuers are little impacted by the conflict between Russia and Ukraine, but volatility will remain high as trade balances of GCC countries depend on the wellbeing developed in market countries, where visibility is relatively low at present.

In terms of sectors, we are favorable for tourism, energy, banks, and insurance, while a more selective approach should be used for sectors such as real estate (suffering from an over-supply, higher financial costs), construction (COVID-related delays, higher input costs), and manufacturing (ISM below 50). It can be expected that stability will return to the entire market once the interest rate cycle is completed and the rate of inflation has stabilized. At the same time, corporate profitability ratios are expected to reach pre-pandemic levels. This is expected to occur between 2023 and 2024. 

Our preferred strategy goes for a hand-selected range of corporate and government issues with a target duration of three years.