Despite the challenging global environment and the shrinkage in sukuk issuance in 2013, the liquidity of the sukuk market, as tracked by the Dow Jones Sukuk Index, showed a slight improvement in the same period.
The Dow Jones Sukuk Index is designed as an independent benchmark to measure the performance of the U.S.-dollar-denominated, investment-grade sukuk issues in the global market. Demonstrated in Exhibit 1, while the total trading volume was relatively stable in 2012, there was a trend of decreasing in volume observed in 2013, which was in-line with tighter liquidity conditions seen in global market. Also, the average monthly trading volume rose to USD 43 million, par amount in 2013, which represented a 5.69% increase over the previous year.
Further studies found evidence that that new sukuk are substantially more liquid than vintage sukuk and have dominated the total market volume. In addition, the most-liquid sukuk tend to have a larger outstanding par amount, which the USD 1 billion outstanding par amount seems to be a threshold for better liquidity.
For more details, please read our Practice Essentials®, “Sukuk Liquidity Trends.”The posts on this blog are opinions, not advice. Please read our Disclaimers.