KUALA LUMPUR, Sept 10 (Bernama) — The sukuk market is picking up again and the issuance is expected to exceeed US$20 billion (US$1=RM3.43) this year, Standard & Poor’s Rating Services (S&P) said in a report.

The report, ‘Sukuk Market Continues To Grow Despite Gloomy Global Market Conditions’, said the appetite from issuers in a large number of countries — Muslim and Non-Muslim — was growing.

In a statement here today, S&P said entities located in more than 15 countries, predominately non-Muslim, had expressed interest or announced their intention to issue sukuks.

S&P credit analyst, Mohamed Damak, said more than 50 percent of sukuk issued in the first half of 2008 were “ijara” (lease financing), most probably as a direct consequence of the debate among some syariah scholars regarding the syariah-compliance of most sukuks previously issued.

He said to date, S&P’s has rated about 30 sukuks (or sukuk programmes), the bulk of which were “ijara” or “musharaka” (venture capital financing).

Mohamed said the US dollar has lost its position as the currency of choice for sukuk issuance this year not only because of its weakness but also due to speculation about the depegging of some Gulf Cooperation Council (GCC) currencies from the dollar.

“Corporates remained the main issuers, with financial institutions and sovereigns far behind,” he said.

According the report, total issuance stood at about US$14 billion in the eight months to Aug 31, 2008, down from about US$23 billion during the same period in 2007.

“The lower level of issuance was largely due to the deteriorated conditions on the global markets resulting in lower investor interest in buying the paper and the related widening of credit spreads,” it said.

It said most sukuks were issued in markets where liquidity was still abundant and/or appetite for syariah-compliant instruments was high, namely the countries of the GCC and Malaysia.