Sukuk prices defy changes in oil

Sukuk prices defy changes in oil
The issuance of international sukuk is growing

By: Amr Fouad

Dubai – Mubasher: Sukuk issues are usually oversubscribed due to the increased demand from Islamic financial institutions, wealthy Muslims, and investors in general. Sukuk are the investment of the future and a strong rival to bonds, chief investment officer at Franklin Templeton Investments Mohieddine Kronfol told Mubasher.

International sukuk are not risky investment instruments and their prices do not change with oil prices, Kronfol noted.

Nasdaq Dubai could play an important role in supporting and energising the regional capital markets through the development of debt markets, especially the sukuk’s, he added.

The collaboration initiative between Nasdaq Dubai and Dubai Islamic Economy Development Centre (IEDC) to enable Dubai to become a global sukuk listing hub is a good step but it is not enough, Kronfol commented. 

When asked about why Malaysia excels over the GCC region as a whole in terms of sukuk issuances, Kronfol explained that Malaysia had a strong national market as well as developed and established insurance and asset management sectors.

Malaysian authorities are working on creating a sharia-compliant work environment, therefore the Asian country’s sukuk market is far bigger than the bonds’ one, the Franklin Templeton Investments' official revealed. He went on to say that the situation was different globally as international bond issues have reached $1.7 trillion since the beginning of 2018, while sukuk issues did not exceed $30 billion.

Following the drop in oil prices and given the geopolitical tension in the Middle East and North Africa (MENA), investors began to deem the GCC’s investment assets, including sukuk, as unstable and vulnerable to geopolitical risks and oil-price fluctuations, he remarked.

The issuance of international sukuk is growing with higher liquidity and while some countries dominated the sukuk market such as Malaysia and the GCC countries, recently a group of countries – including Indonesia, the UK, and the US, have entered the sukuk market, Kronfol concluded.


Translated by: Muhammad Khalid