Malaysian sukuk remains most liquid: Fitch

Malaysian ringgit-denominated sukuk have retained higher liquidity levels compared to pre-Iran conflict times, despite global market instability, states Fitch Ratings. These Malaysian sukuk rank among the most liquid in Fitch's coverage, along with ones from Hong Kong, supranational issuers, and Indonesia, where average liquidity scores fluctuate between 69 and 95.

The average liquidity across all rated sukuk as of early November was 62, showing no change from the previous month but lower than the 68 recorded on January 30. This overall score rebounded approximately 12% from 55 in March. As of November 2, 69% of Fitch-rated sukuk boasted liquidity scores higher than 50, a contrast to lows of 64% in March and 81% in January.

Malaysian ringgit sukuk continue to dominate liquidity, trading above pre-conflict levels. Euro-denominated sukuk saw their liquidity score climb to around 81. In the Gulf Cooperation Council (GCC), local-currency sukuk prove to be more liquid than bonds. Based on maturity tenors, sukuk with durations under a year and those at 10 years or longer exhibit the highest liquidity, according to the report.

In the GCC markets, Saudi Arabia, Qatar, and Kuwait's sukuk recorded an average liquidity score of about 57. Although liquidity in these markets experienced a brief dip due to Houthi attacks in late October, it has since recovered, but remains below January's level. Fitch anticipates sukuk liquidity to remain susceptible to geopolitical tensions, rising interest rates, and capital shifting from emerging to developed markets.