KUALA LUMPUR: Government sukuk issuances in Malaysia are expected to improve in the second half of the year after recording a less active trend in the first half, according to Moody's Ratings.
Moody's Ratings Financial Institutions Group senior vice president and manager Nitish Bhojnagarwala said the government issued less than US$ 9 billion (RM38.6 billion) in sukuk during the period under review, with most of it denominated in ringgit.
"This was a bit lower than what we saw in the same period of 2023. But for the full year, we expect the issuance to be just around US$20 billion (RM85.66 billion) equivalent in Sukuk."This is more or less in line with what we have seen in the last three years," he said at Moody's Ratings Virtual Media Briefing: Global Islamic Finance Industry Update today.
Bhojnagarwala said Malaysia contributed more than US$ 35 billion (RM149.9 billion) in sukuk issuances during the first six months of 2024, compared to over US$ 30 billion (RM128.5 billion) during the same period last year.
Out of that total, Bhojnagarwala said tBhojnagarwala said that in the long term, Moody's Ratings sees Malaysia's government borrowing needs decreasing in line with the new commitment to fiscal consolidation, as outlined in the Public Finance and Fiscal Responsibility Act.
"Nevertheless, the portion of deficit financing through sukuk issuances will remain stable or may even increase, supported by demand driven by the proposed tax exemption on income from the trading of Islamic securities," he said.
Meanwhile, Moody's Ratings Financial Institutions Group assistant vice president and analyst Abdullah Al Hammadi said the firm has observed a general increase of sukuk issuance at all of the main markets that it follows, especially in Malaysia, Saudi Arabia, Indonesia, Turkey and UAE.
Abdullah said although Malaysia's deficit is expected to narrow to 4.4 percent and 3.8 percent of gross domestic product (GDP) in 2024 and 2025, respectively, sukuk issuances are projected to gain strong momentum toward the end of the year.
"Malaysia holds a dominant position in the local currency sukuk market, thanks to a robust Islamic financial ecosystem developed over more than 40 years. While the first half of the year was more about GCC, we believe the second half will see an increase in sukuk issuances from Malaysia."For instance, institutions like Khazanah Nasional Bhd recently issued a sukuk worth half a billion US dollars in August, which demonstrates strong momentum in Malaysia's sukuk issuances," he added.
Malaysia, together with Indonesia, has emerged as the second-largest sukuk issuer regionally, contributing 40 percent, behind the GCC region.
In the first half of 2024, global sukuk issuances reached more than US$ 200 billion (RM856.8 billion). Ends