IFG Views: The growing prevalence of #sukuk-#backed #sukuk #risks creating further strains in the market by accentuating the acute shortage of sukuk and hindering the development of #secondary #markets in sukuk. The likely hold-to-maturity nature of the underlying sukuk collateral will accentuate the #demand-#supply imbalance and limit the volume of sukuk available for trading, potentially aggravating the impact funding challenges for the issuers should the value of its collateral fall. Furthermore, a sukuk-backed sukuk is the closest thing yet developed to an #Islamic structured #investment vehicle (SIV) where a portfolio of long-term assets is financed through the issuance of short-term securities, which adds another risk. Should the underlying sukuk quality deteriorate or #sharia interpretations change, the marketability of the short-term sukuk could be affected, which could lead to liquidation of the underlying collateral into an illiquid market made even more illiquid by the issuance of sukuk-backed sukuk.
Posted on: Mon, 01 Jul 2013 06:22:09 +0000
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