Fitch Ratings: Taiwan's Formosa Sukuk Could Help GCC Issuers to Diversify Their Funding

According to Fitch Ratings, the inclusion of Sukuk instruments in Taiwan’s Formosa bond market could be beneficial to Gulf Cooperation Council (GCC) issuers, including Islamic banks, as it would enable them to diversify funding and broaden their investor pool without increasing currency risk.

Taiwan's Formosa Sukuk market was launched in 2019, after regulatory guidelines were relaxed to allow foreign borrowers to issue investment-grade Sukuk denominated in currencies other than the New Taiwan Dollar. Currently, the Formosa market is almost entirely US dollar-denominated.

Demand for Formosa bonds has been mainly driven by Taiwanese life insurance companies seeking higher yields...