The U.S. dollar-denominated, investment-grade sukuk market that the Dow Jones Sukuk Total Return Index (ex-Reinvestment) seeks to track has continued to expand. As of Aug. 10, 2017, the Dow Jones Sukuk Total Return Index (ex-Reinvestment) tracked 73 sukuk with a market value of USD 74 billion, which represented a growth of 20% YTD. A total of 11 sukuk with a total outstanding par of USD 19 billion were added to the index so far this year, which surpassed the USD 16.75 billion of new additions in 2016.
As tracked by the index, new sukuk issuances came from countries like Saudi Arabia, Indonesia, Oman, and Hong Kong. Saudi Arabia debuted its first U.S. dollar-denominated sukuk and attracted strong investor demand; it raised USD 9 billion in sukuk, equally split into 5- and 10-year tranches. Other returning issuers like Indonesia and Oman raised USD 3 billion and USD 2 billion, respectively. Hong Kong also came back to the market and launched a 10-year sukuk, which extended the yield curve from its two previous five-year sukuk.
The longer-maturity sukuk continued to outperform; the Dow Jones Sukuk 7-10 Year Total Return Index jumped 6.31% YTD as of Aug. 10, 2017. This trend has been consistent in the past few years (see Exhibit 1). The Dow Jones Sukuk Total Return Index (ex-Reinvestment) increased 3.78% YTD, while the Dow Jones Sukuk Higher Quality Investment Grade Select Total Return Index gained 3.50% YTD.
Exhibit 1: Total Return Performance of the Dow Jones Sukuk Maturities-Based Subindices