Global sukuk issuance set to extend recovery: Fitch

KUALA LUMPUR: Fitch Ratings anticipates global sukuk issuance to continue its recovery through the third quarter of 2026 (Q3 2026), driven by cross-sector funding requirements and persistent demand from Islamic investors. The US Federal Reserve is expected to raise interest rates by 25 basis points in December, prompting entities to issue bonds before funding costs increase.

Despite potential geopolitical unrest and higher rates impacting market sentiment, sukuk has maintained strong credit quality, with more than 80 percent of rated sukuk being investment grade and over 80 percent of issuers holding stable outlooks, according to Fitch's global head of Islamic finance, Bashar Al Natoor.

Sukuk issued globally stood at over US$1.1 trillion in Q3 FY26, with a significant concentration in the Gulf Cooperation Council (GCC), Malaysia, Indonesia, and Turkey. Dollar sukuk issuance across core markets surged by 58 percent quarter-on-quarter to US$25.5 billion in the same quarter, while dollar bond issuance declined by 25.9 percent.

African sukuk outstanding surpassed US$7 billion, and Indonesia issued its first Fitch-rated rupiah sukuk, which subsequently defaulted. Meanwhile, yield spreads between GCC investment-grade sukuk and US Treasuries widened.

Saudi Arabia plans to continue issuing sukuk in 2027, while Kuwait introduced a new sukuk law to enhance accessibility. Malaysia issued a US$1.5 billion sukuk after a five-year hiatus, and Pakistan enlisted an international banking consortium to execute a sukuk program. The Philippines central bank released a draft circular to incentivize sukuk issuance and investment, and Egypt intends to issue its first tax sukuk.