Page 84 - KLIFF2022eBook

KLIFF 2022 PROGRAMME BOOK

We have revised down our sukuk issuance forecasts for 2022 to about $130 billion from our initial projection of $145 billion-$150
billion, and we see further risks building. Three factors explain the negative trend:

Lower and more expensive global liquidity.
– Historically high inflation has prompted major central banks to change policy stance and accelerate rate increases, which
has reduced global liquidity and made it more expensive. Investors’ risk aversion has also increased, with major segments
of the capital markets (for example, speculative-grade issuers) experiencing significantly lower activity in first-half 2022
compared with 2021. The sukuk market, as a component of the global capital market, is not immune to global trends.

Issuers’ reduced financing needs.

– The rise in oil prices since 2021 has boosted the balance sheets of several issuers in core Islamic finance countries (see
chart 4). We were therefore not surprised to see a decrease in issuance in first-half 2022. That said, in Saudi Arabia we
note an increase in local currency issuance volumes, since the government aims to develop the local capital market.
We also observe corporates’ continued caution regarding capital expenditure plans. The scars of the pandemic and
uncertainty related to the financing environment have led many to rein in growth investments, turn to banks for funding,
or start deleveraging.

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