Record 3Q for sukuk

Global sukuk issuance hit a record in 3Q 2025, defying market volatility and the usual seasonal slump, according to a note by Fitch Ratings’ seen by EnterpriseAM UAE. Core markets — the GCC, Malaysia, Indonesia, Turkey, and Pakistan — issued about USD 80 bn in the quarter, up 22% q-o-q and 89% y-o-y.

What’s driving the boom: Lower funding costs and ample GCC liquidity offset tighter shariah compliance rules and regional tensions. The Fed’s September rate cut to 4.25% added momentum, while conventional bond issuance in the same markets fell 17.6% q-o-q.

Sukuk now account for 35% of total debt issuance in core markets, up from 27.5% a year earlier. Outstanding sukuk rose 15.5% y-o-y to USD 1 tn by end-3Q, with 28% denominated in USD. ESG-linked sukuk represented 13% of USD-denominated issues, alongside a rising share of subordinated instruments.

Regional leaders: Malaysia accounts for the largest share of outstanding sukuk issuances with 34%, closely followed by Saudi Arabia with 30%. Outside of the GCC, Indonesia, Malaysia, and Turkey together accounted for 64% of global issuance during the quarter. In the GCC, sukuk now make up 40% of outstanding debt instruments compared to 16% in emerging markets.

Sukuk issuance is on track to surpass 2024 levels, with 2026 prospects described as “promising.” Growth will be supported by refinancing needs, diversification goals, and Islamic-finance reforms. The agency’s base case assumes oil at USD 70 per barrel this year and USD 65 in 2026, though it added that price shocks and new shariah requirements could pose downside risks.

REMEMBER- Proposed reforms to sukuk aim to make them less like conventional interest-bearing debt and more like an asset-backed structure, where sukuk holders would gain full ownership of the underlying assets and expose them to additional risks like defaults. It could also increase costs and red tape for issuers through additional asset transfer and legal documentation.

Credit quality stays strong: The market remains resilient, with no defaults or downgrades among Fitch-rated sukuk in 3Q. About 80% of issues are investment grade, and 88% of issuers carry a stable outlook.

Structural shifts: Qatar Central Bank expanded its Primary Dealer Framework to include ijara sukuk, while Saudi Arabia’s potential inclusion in JPMorgan’s EM bond index could boost SAR-denominated demand. The UAE’s Higher Shariah Authority also issued new guidance on asset-sale rights, prompting issuers to revise documentation. Fitch said the change does not make unsecured sukuk equivalent to secured debt but could affect future rating treatment.

MARKETS THIS MORNING-

Asian markets are mixed once again this morning, South Korea’s Kospi is up 1.4%, as shares in South Korean chipmakers SK Hynix and Samsung Electronics hit record highs. The rally came following news of possible positive impact on both companies from OpenAI and AMD’s chips agreement. Over on Wall Street, futures are little changed after the S&P 500 and Nasdaq closed in the red yesterday.

THE CLOSING BELL-

The DFM inched down 0.04% yesterday on turnover of AED 234.4 mn. The index is up 15.5% YTD.

In the green: Chimera S&P UAE Shariah ETF — Share Class B — Income (+5.9%), Chimera S&P UAE UCITS ETF — Share Class A — Accumulating (+4.5%) and Emirates REIT (CEIC) (+4.0%).

In the red: Al Mal Capital REIT (-5.7%), National International Holding Company (-4.5%) and Emirates Reem Investments Company (-3.4%).

Over on the ADX, the index rose 0.1% on turnover of AED 1.9 bn. Meanwhile, Nasdaq Dubai was down 0.1%.

CORPORATE ACTIONS-

Emirates Central Cooling Systems’ (Empower) general assembly agreed to pay shareholders AED 437.5 mn — AED 4.375 fils per share — as an interim dividend for 1H 2025, according to a DFM disclosure (pdf).