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Oil prices to help shape sukuk markets’ performance in 2019

Tightening liquidity conditions worldwide, high geopolitical risks in the Middle East, and
challenges inherent to sukuk issuance will likely dampen sukuk market performance in 2019. S&P
Global Ratings anticipates total issuance of $105 billion-$115 billion ($28 billion-$32 billion for
foreign currency issuances and $85 billion-$95 billion excluding reopening of instruments) this

Nevertheless, we expect higher demand for funding in most GCC countries, given our reduced oil
price assumptions compared with last year’s outturn of $71 for Brent (see “S&P Global Ratings
Lowers Brent And WTI Oil Price Assumptions For 2019 Through 2020; Natural Gas Price
Assumptions Are Unchanged,” published Jan. 3, 2019, on RatingsDirect). We also expect Malaysia
will continue to support market growth.

Last year, new sukuk issuance totaled around $91.4 billion ($114.8 billion including reopening,
which consists of issuances under local currency unlimited programs) compared with $95.7 billion
in 2017 ($120.6 billion with reopening). The decrease was even more visible, at 15.1%, for foreign
currency sukuk issuance, primarily in U.S. dollars. The marked drop in issuance in Saudi Arabia
and Qatar were partly offset by issuances from the Central Bank of Kuwait and a hike in
private-sector issuances in the United Arab Emirates (UAE). Activity in Malaysia and to a lesser
extent Indonesia continued to support the market, contributing collectively to around 52% of new
issuance in 2018. Issuers in Turkey also stepped up their issuances to diversify their investor
bases amid substantial reliance on external debt and reduced access to global capital markets in
the second half of the year.

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