The value of Islamic bonds (Sukuk) issued in the first quarter slumped by almost half to $2.3 billion from a year earlier, with the number of bond issues shrinking to 14 from 30 amid global credit crunch, data compiled by Zawya.com. said. “We've had a whole credit crunch and investors lost their confidence,” James Milligan, head of Middle East fixed-income trading at HSBC Holding PLC, told Zawya Dow Jones. The steep downturn in issuance of bonds compliant with principles of Islamic law, or Shariah, is a further sign that investment in the booming Gulf may not escape the ravages of a tighter lending market and fear of a US recession. Bankers say the market uncertainty is creating a backlog of Sukuk issuance that may restore the market later this year. Sukuk bonds ban the receipt of interest and are typically linked to physical assets, which pay a dividend or profit to bondholders. In the Middle East, issues of Sukuk fell to $642 million in the first quarter, from $3.9 billion a year earlier, according to Zawya.com. Seven bonds were sold in Bahrain, compared with only one issue in Qatar and one in Saudi Arabia. No Sukuk were sold in the UAE during the period. Saudi Arabia's Taajeer sold SR250 million ($66.7 million) of Islamic bonds in an issue managed by Saudi Hollandi Bank. In Qatar, Qatar Islamic Bank last month closed a $137.5 million sukuk on behalf of Salam Bounian Development Co. to finance the construction of the real estate project The Gate. Credit-rating company Moody's Investor Services expects $50 billion of sukuk funding over the next 18 months. Standard & Poor's forecasts that the sukuk market, which exceeded $60 billion last year, will surpass $100 billion by the end of the decade. Among the offerings expected is up to $250 million in Sukuk from Kuwait's Aayan Leasing and Investment Co. The Islamic mortgage lender Amlak Finance, based in Dubai, in the UAE, plans to sell 4.8 billion dirhams ($1.3 billion) of Islamic bonds during the third quarter this year and Bahrain Islamic Bank plans to issue sukuk worth 250 million Bahraini dinars ($663 million) in the fourth quarter to finance expansion plans. In March, shareholders of UAE-based National Central Cooling Co., or Tabreed, approved the issuance of $300 million in convertible sukuk. The UAE's Bukhatir Investments has plans to raise $200 million through the Islamic route as the real estate group mulls expansions. And state-owned Dubai Electricity and Water Authority, or Dewa, could revive its efforts to sell as much as $1 billion in Islamic bonds this summer after it shelved similar plans late last year due to high borrowing costs. In Asia, the Islamic Development Bank is targeting around 400 million ringgit ($125 million) in Islamic bonds in early May, said Ahmed Hariri, director of the Saudi Arabia-based organization's regional office in Kuala Lumpur, Malaysia. People's Leasing Co. Ltd., a specialized Sri Lankan leasing company, aims to sell a 500 million Sri Lankan rupee ($4.6 million) Sukuk before the end of the month, with a second 500 million rupee tranche to come in the subsequent three months, a company executive said Thursday. The offering will be the maiden Islamic bond from Sri Lanka. IDB to issue ringgit Sukuk The Islamic Development Bank (IDB) is set to issue MTN Program of RM1.0 billion under which Sukuk up to RM500 million would be issued as the first tranche. It has appointed CIMB and Standard Chartered Bank as joint lead managers and bookrunners for the transaction and Kuwait Finance House (Malaysia) Bhd and RHB Islamic Bank as joint co-lead manager for the establishment. The transaction marks the third Sukuk issuance by the IDB after its Sukuk issuances in 2003 and 2005 but this would be the first Sukuk in a member country's currency, it said in a statement here Thursday. IDB, a multilateral development bank with headquarters in Jeddah, Saudi Arabia is a ‘AAA' rated institution owned by 56 sovereign countries. It is mainly focusing on promoting socio-economic development in its member countries, and Muslim communities in non-member countries. The bank is also mandated to promote the development of Islamic banking and finance. It operates in adherence to Islamic principles. – Agencies and it raises fund from the international capital markets through issuance of Shariah
