Global Islamic Bond issuance: Rockets to $85 Billion in 2011; to surpass $200 Billion in 2012‎

Global Sukuk (Islamic bonds) issuance, which exceeded $85bn last year translating a growth of 90% on y-o-y basis, is expected to increase by 25-30% to break the USD 200 billion barrier. According to Kuwait Finance House Research Limited (KFHR), the 2011 total to $85.1bn represented a year-on-year increase of 90.2 percent compared to 2010. The global Sukuk secondary market also reached an all-time high of $178.2bn by the year-end, a 24 percent increase on 2010, the report said. Sukuk issuance in 2012 will increase by 25-30% to break the $ 200 billion barrier, despite challenges that face prosperity of this industry, such as the financial struggles of some European countries and their effect on the rest of the world. The report says that several positive indicators forecast a brighter future for Sukuk during this year, such as the increasing role of governmental issuance that will form the backbone of the market to boost the private sector and finance major developmental projects; the economic growth that the region and emerging markets are witnessing; having new parties and the increase in popularity of Sukuk outside Islamic markets, after Sukuk successfully substituted conventional bonds. Meanwhile, HSBC Holdings Plc said that the sales of Islamic bonds may rise to $44 billion this year as demand outstrips supply and as Asian and Middle East investors tap the market complying with Islamic banking rulings. Mohammed Dawood, managing director of Islamic global markets, Europe, Middle East and Africa for HSBC Amanah, said the dramatic increase in Sukuk issuance has been triggered by Islamic bonds' remarkable performance amid the global meltdown. While Malaysia and Southeast Asia seems to be setting the pace, there are signs that the Sukuk sector in the Gulf Cooperation Council (

) markets and a few fellow MENA countries such as Turkey are showing a rebound, with Saudi Arabia and the UAE offering the best potential. Sukuk structuring experts such as Mohamad Safri Shahul Hamid, a senior executive of CIMB Islamic Bank, stress that the (Malaysian) ringgit Sukuk market will continue to dominate with several mega issuances to fund infrastructure development activities and programs. A Reuter reports said that a flurry of Sukuk issues from the Gulf this week shows borrowers are worried about limited global liquidity and future access to debt markets, and are turning to Islamic finance as a source of money that is relatively untouched by the global turmoil. Gulf bond issuance was lower than expected last year as many companies held off on coming to market, unwilling to pay high prices due to poor market conditions; total debt issuance from the Gulf region last year was $25.8 billion, short of analysts' estimates that volumes would be well above $30 billion. Another report from Wall Street Journal confirmed this trend, saying that tighter funding in Europe is pushing Middle East issuers to tap the still-liquid Islamic finance markets for funds. Two regional banks have sold Islamic bonds, or Sukuk, last week. Dubai-based Emirates Islamic Bank issued a $500 million, five-year Islamic bond with a yield of 4.718%, while Abu Dhabi-based First Gulf Bank sold a $500 million, five-year Sukuk with a yield of 4.046%. Yet another research report tabled by Morgan Stanley stated that Middle East and North Africa foreign bond sales in 2012 will surpass last year's $27.6 billion as borrowers need to pay loans and will increasingly choose bonds. (End)