KUALA LUMPUR: Islamic bond issuance has hit a record high this year signaling a revival in the Sukuk market following the Dubai debt crisis and other setbacks over the past few years. The volume of Sukuk bonds, which comply with Islamic law, has reached $10.2 billion in the year-to-date, up 68 percent from the same period last year, according to data from Dealogic. Corporate issuers captured 65 percent of the market with $6.6 billion of issuance - double the volume for the comparable period in 2010. Nigel Denison, head of asset management and markets at Bank of London and the Middle East, said the uptick in global Sukuk issuance was due both to a general recovery across all markets and a return of confidence in the Middle East following the Dubai debt crisis. In late 2009, Dubai World asked for a six-month standstill on a $3.5 billion Sukuk issued by its real estate subsidiary Nakheel a month before its repayment deadline. The standstill rattled investor confidence across the region as well as appetite for Islamic bonds. However, Nakheel has since restructured its debt and is said to be planning another Islamic bond as part of its repayment plan. But despite growing confidence in the Middle East, data from Dealogic shows that Islamic bond issuance in the region still lags South East Asia where the Sukuk market, led by Malaysia, is flourishing. This year, Malaysia issued a total of $7.8 billion worth of Islamic bonds followed by Saudi Arabia which had $1 billion of Sukuk sales. The three largest Islamic bonds were also offered in Malaysia, the biggest being the $1.9 billion Sukuk issued by water asset management company Pengurusan Aset Air Berhad. And CIMB, Malaysia's second largest financial services provider, tops the Islamic bond bookrunner ranking with a 26 percent market share and $2.6 million worth of deals, followed by HSBC with 21 percent market share and a total $2.1 billion of transactions. On the outlook for the Sukuk market, those in the industry were optimistic about global issuance and investor appetite in the Middle East. Denison pointed to the $400 million Sukuk issued by the Sharjah Islamic Bank and the $750 million Islamic bond offered by the Islamic Development Bank in May, both of which were oversubscribed, as a sign that confidence in the region was picking up. On the outlook for Sukuk, he said: "Having had a hiatus over the last couple of years we now see that there's demand for the right deals and if you believe that Islamic finance will grow, as we do, it will need investment products and many will be based around Sukuk." Senior executives at HSBC Amanah were equally upbeat following HSBC's own $500 million Sukuk last month as part of plans to grow its Islamic banking unit. Georges Elhedery, head of global markets for the Middle East and North Africa at HSBC, said: "We expect our sale to encourage other conventional banks that have an Islamic business to follow suit." Mohammed Dawood, head of Islamic capital markets at HSBC, said the bank had a "healthy pipeline" of mandates for this year. "We expect this year to beat last year's number, and to beat the issues we managed in 2007," he added.
