Business Reporter
DOHA: More than 100 Islamic bonds, or sukuks, are in the offing to raise as much as $38bn, of which more than 50% would come from the GCC region, according to Global Investment House.
Although the issuance was impacted by the global crisis, their revival would partly depend on the recovery of the financial system in the GCC region, Global said in its latest report.
“Despite the current difficulties facing the Islamic financing industry, the long-term potential for the sukuk market is still positive. The speedy recovery of the sukuk market depends largely on the global financial industry rehabilitation process, especially in the GCC region,” it said.
Highlighting that there are more than 100 sukuk issues aiming to raise more than $38bn, Global said due to the turmoil, some of these announced issuance might not see the light, “but the figures show that there is a long line that await the global economic recovery to roll, in order to enter the market.”
Many (sukuk) issues were being delayed in further anticipation for the right time to jump back onto the wagon and moreover new issues were being announced without specific date, as part of efforts to capitalise on the demand present in the market, it said.
Basically, sukukr are piling up, waiting for the global economy - especially the finance industry - to ride out the recessionary times, it said.
Given the overwhelming existing demand, the sukuk issuance was expected to get back on track and part of the revival would depend largely on the recovery of the financial system in the GCC region, as issues from the region constituted more than 54% of the total amount last year.
In 2008, the amount raised through sukuk issuance (across the world) had fallen sharply by 55% to $15.1bn mainly due to the credit crunch that forced investors to step aside from the money markets.
The negative growth of sukuk issuance was mainly due to the global financial crisis, Global said.
“Even though Islamic financial institutions had no toxic assets, they had been weakened by the turmoil because they were influenced by the macro shocks of shortage in liquidity and the acute absence of investors’ confidence,” the report said, adding still Islamic firms were in a better shape than the conventional institutions.
Calling for standardisation on sukuk regulations, Global said it would not only build brand image but also yield other benefits such as reduced cost and eliminate inconsistency.
Observing that efforts were underway to lay the foundation for standardised rules for the Islamic financing industry, the report said nevertheless, the industry would need to work in its standards in order to present the industry as a viable industry that can be part of the global financial system.
Zawya Dow Jones adds: Sukuks worth around $40bn are waiting to be mandated or executed in the Middle East region, a senior executive at Dubai Islamic Bank said yesterday.
“This is pending market stability and recovery of funds,” Nadeem Lodhi, head of capital markets and syndications at DIB Capital told delegates at a conference in Dubai. The long term prospects of sukuk market remain strong, he added.
DIB Capital, previously called Millennium Capital, a 100% owned subsidiary of Dubai Islamic Bank, is planning to launch a fund to invest in the sukuk market, Lodhi said. He declined to provide further details.