Sukuk bond market: mixed signals

Last year was supposed to represent the pivotal moment in which sukuk debt – Islamic versions of bonds – came into their own as a deep, mature and liquid source of funding.

Issuance data from January suggest the jury is still out.

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Last year saw a record $144bn of sukuk issuance, according to Islamic Finance Information Service (Ifis). More than that, the market featured renewed reach, strength and innovation: sovereign issues came from ever further afield, notably Turkey; headline deals were bigger than ever before, particularly Qatar’s record $4bn issuance; corporate issuance was not only widespread but innovative, such as Axiata’s dim sum offshore Rmb sukuk; and it was notable that the first Basel III-compliant tier one instrument from a Middle Eastern bank came not in conventional but Islamic form, with a $1bn tier one perpetual from Abu Dhabi Islamic Bank in November.

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According to Ifis analyst Mahinaz El Aasser, issuance in January, at $12.64bn, was down 38 per cent on January 2012, although it was well up on December. Also, it remained utterly dominated by domestic transactions, and in particular Malaysia’s, by far the most sophisticated sukuk market in the world – which is interesting, and useful for Malaysians, but not necessarily a sign of a maturing market.

Read more: http://blogs.ft.com/beyond-brics/2013/02/13/sukuk-bond-market-mixed-signals/#axzz2KrR0rC00