Fitch: Kuwaiti Sukuk Among the Most Liquid... Regionally

Fitch Ratings reported that liquidity levels in the securities it rates have generally stabilized since August 2026, but remain below January levels, which preceded the outbreak of war with Iran, noting that liquidity varies by credit rating, country, sector, currency, and maturity.

Investment-grade securities remain more liquid than their non-investment-grade counterparts, while securities rated in the top two categories, “AAA” and “F1sf,” exhibit the highest liquidity levels. Asset-backed securities lead all sectors in terms of liquidity.

Fitch relies on Bloomberg’s liquidity assessment indicators to evaluate liquidity, which measure the liquidity of each individual security on a scale ranging from one to 100. A score of 100 reflects the lowest liquidation costs within a given category, whereas a score of one indicates the highest costs.

This model is based on daily data to construct a liquidity curve specific to each security, illustrating the relationship between trading volume, cost, and time. Fitch’s analysis excludes securities with local ratings, and liquidity scores are calculated based on the number of investment instruments.

Investment-grade securities recorded an average liquidity score of 67 on November 2, compared to 69 on August 4, 64 on March 23, and 72 on January 30. This average is significantly higher than that of non-investment-grade securities, which stood at 35, compared to 40 in August, 33 in March, and 48 in January. Securities rated “A” showed the most improvement in liquidity levels between October and November.

The average liquidity score for all rated securities stabilized at approximately 62 in early November, recovering by about 12% from its lowest level recorded in March, when it stood at 55, compared to 64 in August and 68 in January.

On November 2, approximately 69% of Fitch-rated securities exceeded a liquidity score of 50, compared to their lowest level of 64% on March 23. Despite this improvement, the percentage remains well below the 81% recorded in January. On the same date, the median liquidity score for all rated securities, excluding those with local ratings, reached 61, surpassing its March low of 55, but remaining below the pre-war level of 68. Fitch’s ratings cover more than 70% of outstanding US dollar-denominated securities globally.

Geographically, securities from Association of Southeast Asian Nations (ASEAN) countries enjoy higher average liquidity compared to those from Gulf Cooperation Council (GCC) countries. Liquidity levels declined during periods of escalating geopolitical tensions in the Middle East, particularly in March. Fitch expects security liquidity to remain affected by geopolitical tensions, rising interest rates, and the shift of capital from emerging markets to advanced economies.

Securities issued by Hong Kong, Malaysia, multinational institutions, and Indonesia were among the most liquid, with average scores ranging between 69 and 95. Within the GCC, Saudi, Qatari, and Kuwaiti securities recorded the highest liquidity levels, with an average of approximately 57. These levels were temporarily impacted by Houthi attacks in late October before rebounding, although they remained below January levels.

Conversely, liquidity scores for Turkish and Egyptian sukuk hovered around 50 points. Turkish sukuk declined slightly from March levels, while Egyptian sukuk maintained higher levels compared to the same period last year. At the sector level, asset-backed sukuk led the list of the most liquid instruments, being the only sector to surpass pre-war liquidity levels, followed by multi-national corporate sukuk and then sovereign sukuk. Conversely, sukuk issued by real estate developers in the UAE recorded the lowest liquidity levels within the coverage scope of Fitch.

In November, the average liquidity scores for investment-grade Gulf sukuk aligned with Environmental, Social, and Governance (ESG) standards converged with those of their traditional investment-grade counterparts.

Regarding currencies, Malaysian ringgit-denominated sukuk retained their position as the most liquid, continuing to trade at levels exceeding those seen before the war. Meanwhile, the liquidity score for euro-denominated sukuk rose to approximately 81 points. In the Gulf region, sukuk denominated in local currencies exhibited higher liquidity compared to bonds. By maturity, sukuk with maturities of less than one year and those with maturities of 10 years or more were the most liquid.

The size of the global sukuk market covered by the Bloomberg Liquidity Score exceeded $950 billion in outstanding value. Approximately 84% of securities within this market recorded liquidity scores above 50 points, while the proportion of securities with liquidity scores below 25 points stood at around 2.5%.

The segment with liquidity scores ranging between 85 and 90 points accounted for the largest market share at 11.1%, followed by the segment with scores between 55 and 60 points at 10.3%.