Sukuk liquidity nears pre-war levels despite ongoing tensions

Mettis Global reported that Fitch Ratings found liquidity across most of its rated sukuk has risen to near pre-war levels, even though geopolitical tension continues. Fitch noted that sukuk liquidity has not fully returned to January levels, yet August's average reading was the strongest since the conflict started. The gains vary widely by rating band, country, sector and currency, with each market's exposure to geopolitical risk shaping the pace of recovery.

As of 4 August, just over 75% of the rated sukuk scored above 50, compared with 64% on 23 March and 81% in January. The median score stood at 64, up from 55 in March but still below the pre-war figure of 68. Investment-grade paper averaged 69, far above the 40 recorded for non-investment-grade issues, and A-rated sukuk showed the sharpest jump between July and August.

Hong Kong, Malaysia, Indonesia, Egypt and supranational issuers recorded the top liquidity scores, while Egypt, Oman, Malaysia and Ireland have already moved beyond their pre-war readings. Malaysian ringgit sukuk were the sole currency bucket above pre-war levels in August, and euro-denominated paper also looked strong. Among sectors, only asset-backed securities have passed their pre-war liquidity, with financial institutions next in line.