CIMB Asset Management Monthly Sukuk Newsletter

CIMB Asset Management has launched a monthly newsletter about the Sukuk market:

"Industry practitioners are positive that 2011 will favour the sukuk industry and various indicators show that a delayed resuscitation of the Islamic bond market is on track this year. As economies recover and high crude oil prices help to revive the market, sales of international sukuk are forecasted to grow over USD22 billion this year, which represents a 29 per cent increase from the previous year. The upswing in corporate spending, an increase in issuers seeking funding diversification and improving investor sentiment in the Gulf are also expected to fuel the sukuk market globally.

According to the HSBC/NASDAQ Dubai US Dollar Sukuk Index, the difference between average yields for emerging-market sukuk and the London interbank offered rate narrowed to 282.7 basis points on
6 January 2011 - the least since August 2008. Industry practitioners agree that the low sukuk yield spreads should entice sukuk issuers to tap the market.

Saudi Arabia, Malaysia and Qatar have announced plans to spend USD1 trillion on development projects throughout the next decade and at least USD3.9 billion of sukuk sales announced this year will fund the construction of oil refineries, steel mills and petrochemical plants. In addition, various Governments around the world have announced numerous measures this month to kick-start their respective sukuk
markets fuelling optimism for this year’s sukuk market.

The sukuk market in Indonesia has not taken off as much as it should have due to a restriction on the type of assets that can be used to facilitate sukuk transactions. Currently, the assets that can be used for a sovereign or quasi-sovereign sukuk for example are limited to state owned property and land. In other countries, like Malaysia, a vast number of infrastructure projects are financed via Istisna’ whereby the project itself becomes the underlying asset. The Indonesian sukuk market should increase dramatically if the proposed legislative amendment is approved by the National Shariah Board.

This month in Kazakhstan, the Government announced that they expect to pass legislation within the next two months that would enable companies to issue sukuk.

In Central Europe, it has been reported that the first sukuk from France may be issued in early 2011 once the Government introduces guidelines for sukuk offerings. France may soon be the new ‘Islamic Finance Hub of the West’, as it emerged this month that HM Treasury in London have decided to postpone their over-hyped sovereign sterling sukuk offering once again. In summary, a sizable USD3 billion worth of sukuk was raised globally in January alone. The month has shown that there should be global potential growth for the sukuk market in the coming months. With newcomers issuing more sukuk, the market should be able to flourish and provide more opportunities for investors."

Complete newsletter for free download attached to this news.

CPIAM Monthly Sukuk Report - Jan 2011 (2).pdf561.88 KB