IslamicFinance.de

The development of the sukuk market is sending mixed signals. On the one hand, issuance of sukuk in the last year has attracted not just Islamic but conventional investors by the yield, diversification and risk profile. Many deals were innovative, enjoyed popularity and performed well in the aftermarket. On the other hand, the market remained utterly dominated by domestic transactions, and there are still mixed reports about liquidity, both in domestic and cross-border markets. Although sukuks still don’t trade with anything like the volume common in conventional markets, a record year for global sukuk issuance is expected.

According to HSBC, global Islamic bond sales are set to surpass sales from 2012 by 64%. Mohammed Dawood, Dubai-based MD of debt capital markets at HSBC Amanah, says that sales in the six-nation GCC will surge to between $30bn and $35bn this year. The Dubai government kicked off sovereign sukuk sales last month with $750m of 10-year Islamic notes after its borrowing costs fell 40%. Standard and Poor’s estimates show that Islamic financial assets will double by 2015 to $3-trillion.

HSBC is searching for mandates for Islamic bond issuance in 2011 that are above pre-crisis levels, with at least one more sukuk expected to come to market before mid-July.
Mohammed Dawood, managing director of global capital financing at HSBC, stated that debt capital markets have experienced a comeback in recent months, as the cost of borrowing came down and liquidity levels for Islamic bonds reached the highest level they have seen been in four or five years.