Global sukuk issuance looks ‘uncertain’ for 2018, says S&P Global

The outlook for Islamic bonds remains 'uncertain' for the coming year, according to ratings agency S&P Global. (Reuters)
Updated 09 January 2018
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Global sukuk issuance looks ‘uncertain’ for 2018, says S&P Global

LONDON: While 2017 was a bumper year for global sukuk issuance, the outlook for Islamic bonds remains "uncertain" for the coming year, according to ratings agency S&P Global.
Global sukuk issuance in 2017 reached $97.9 billion, an increase of 45.3 percent, from the $67.4 billion recorded in 2016. The increase was underpinned by large issuances by GCC countries, particularly the $9 billion sukuk issued by Saudi Arabia in April. This remains the largest issuance globally to date.

"Driving this performance were good liquidity conditions in the GCC and, more generally, globally, as well as activity by some countries with the goal of further developing their Islamic finance industries," said Dr Mohamed Damak, head of Islamic finance, at the ratings agency.
Non-GCC countries also contributed to the rise, said S&P Global, with Hong Kong tapping the market again last year and Nigeria issuing its first sukuk. Morocco and Tunisia are expected to issue sukuks this year, according to the report.
The report said while core Islamic finance countries will continue to have “significant” financing needs in 2018, the sukuk market could be held back by tightening global liquidity and rising geopolitical risks in the Middle East.
The report cited sanctions imposed on Qatar by a group of Arab states in June 2017, as well as continued animosity between Iran and GCC countries as factors that may undermine investor interest in the product.
It also suggested that the “slow progress” on standardizing Islamic finance products will limit the market’s potential. S&P Global expects issuance volumes to hover nearer $70-80 billion in 2018, according to the report.


French state-owned bank drops plan to aid trade with Iran

Updated 24 September 2018
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French state-owned bank drops plan to aid trade with Iran

  • US-imposed sanctions sanctions iare making trade with Iran increasingly difficult for European companies - such as Volvo
  • US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers

PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.

Swedish truckmaker Volvo has been forced to stop assembling trucks in Iran as it can no longer get paid with US sanctions taking bite.
Volvo spokesman Fredrik Ivarsson said due to the sanctions Volvo could no longer get paid for any parts it shipped and therefore had taken the decision to not operate in Iran.
"With all these sanctions and everything that the United States put.. the bank system doesn't work in Iran. We can't get paid... So for now we don't have any business (in Iran)," he said.
The US is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.