The global Islamic finance industry continues to rapidly grow its assets but only in a few core markets, an S&P Global Ratings report has revealed.
The New York-based rating agency expects positive contributions from all the Islamic finance industry’ components to sustain this growth throughout the remainder of 2024. Headwinds for the sukuk market are on the horizon, though, with the expected adoption of a new standard that could subdue issuance growth in 2025 and beyond.
Total assets of the global Islamic finance industry continue on its growth path. S&P Global Ratings expects high-single-digit growth in 2024-2025 after a growth of 8 per cent in 2023 (excluding Iran).
“The sukuk market also saw good but softening growth in issuance volumes. We expect sukuk issuances to hover between $160 billion and $170 billion in 2024, furthering the industry’s asset growth in 2024,” said the S&P Global Ratings report.
According to the report, the sukuk market has started 2024 strong, with total issuance reaching $46.8 billion at March 31, 2024, compared with $38.2 billion at the same date a year prior.
Consumer demand lifts gold prices
Healthy consumer buying offered further support in the first quarter (Q1) of 2024, World Gold Council (WGC) said in its quarterly report. Gold demand, excluding on the counter (OTC) demand, slipped five per cent, year-on-year, to 1,102 tonnes, due to continued ETF outflows.
“Inclusive of sizable OTC buying by investors, total gold demand increased three per cent, year-on-year, to 1,238 tonnes – the strongest first quarter since 2016. Q1 saw no let-up in the pace of central bank gold buying: 290 tonnes (net) was added to official holdings, only part of which is currently reflected in IMF data,” said the WGC report, a copy of which was made available to the Egyptian Mail.
Rising demand for bar, coin
Bar and coin demand matched the previous quarter at 312 tonnes, translating to a three per cent, year-on-year increase. Global gold ETF holdings fell by 114 tonnes, according to the WGC report.
“Europe and North America both saw quarterly outflows, slightly countered by inflows into Asian-listed products. US-listed funds saw a positive shift late in the quarter,” it said.
The jewelry sector was healthy, given the price rally. Global jewelry consumption was just two per cent lower year-on-year at 479 tonnes, according to WGC data.
“Jewelry fabrication grew by one per cent, year-on-year, to 535 tonnes, resulting in inventory build of 56 tonnes during the quarter. Technology demand for gold recovered 10 per cent, year-on-year, as the AI boom boosted demand in the electronics sector,” it said.
Outlook
The WGC expects bar and coin demand to remain strong with China taking the lead.
“China is largely responsible, having started the year with the strongest quarter since 2017. With improving household wallets, the positive example set by continued central bank demand, a poor domestic equity, and property market and currency fragility, the conditions are in place for demand to continue at solid levels,” the report forecast.
The report has said Indian bar and coin demand has been lagging model-suggested levels based on economic growth. “It is expected to be higher than last year, helped by an expectation for a better monsoon and solid economic growth,” it added.
