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142.40 |
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255.91 |
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201.79 |
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Islamic financial assets will double by 2015 to as much as $3 trillion, S&P’s estimates show. Photo — Bloomberg file picture
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Dubai: Global Islamic bond sales are set to surpass the 2012 record as Arabian Gulf issuers take the lead to tap borrowing costs that tumbled in the past year, according to HSBC Holdings, last year's top sukuk underwriter.
Sales in the six-nation Gulf Cooperation Council (GCC) will surge to between $30 billion and $35 billion in 2013, Mohammed Dawood, Dubai-based managing director of debt capital markets at HSBC Amanah, said in an interview. That's up as much as 64 per cent from last year. The government of Dubai kicked off sovereign sukuk sales last month with $750 million of 10-year Islamic notes after its borrowing costs dropped 40 per cent.
"We will see a number of new issuers in the region who have now actually taken a hard look at this and said 'okay look this makes a lot of sense for us,'" Dawood said on February 7. "'Not only can we get the size, can we get the tenure, but potentially from a pricing perspective, there is a real cost saving and there is a cost benefit.'"
Sukuk sales more than doubled between 2010 and 2012 to $46 billion as issuers sought to tap wealth of Muslim investors who prefer returns complying with the religion's ban on interest. Islamic financial assets will double by 2015 to as much as $3 trillion, Standard and Poor's estimates show. While sales are off to a slower start this year, governments and companies from Turkey, Indonesia, Australia and Hong Kong may help spur worldwide issuance to $55 billion to $60 billion, said Rafe Haneef, HSBC Amanah Malaysia chief executive officer.
Turkish momentum
The average yield on GCC sukuk dropped 117 basis points, or 1.17 percentage points, in the past year to 3.04 per cent on February 8, according to HSBC/Nasdaq Dubai's GCC US Dollar Sukuk Index. Non-Islamic bonds from the Gulf yield 37 basis points more, HSBC/Nasdaq Dubai data show.
HSBC arranged 24 per cent of the world's 2012 Islamic bond sales, taking the top underwriter position from Kuala Lumpur-based CIMB Group Holdings, which held the spot for five years, according to data compiled by Bloomberg. The London-based lender helped Turkey arrange $1.5 billion of debt Islamic bonds in September.
That sale "created its own momentum" and may spur "further activity at the government level and at the government-related enterprise level," Dawood said. "There is a tremendous amount of interest among issuers to look at sukuk," he said. Turkey, a majority Muslim nation, has biggest economy in the eastern Europe and the Middle East, excluding Russia.
Slower start
Malaysia, home to the world's largest Islamic debt market, is also poised to witness growth this year and, along with the Asia Pacific region, will account for about half of global sales, according to Haneef.
"We will see an increased issuance but from multitude of markets as opposed to just Malaysia and the Middle East," he said. "Five years ago, it was dominated by two centers: GCC and Malaysia. Now you are seeing Turkey, Indonesia, and hopefully others like Australia and Hong Kong will follow suit."
Still, sukuk sales globally are down 20 per cent to $5.35 billion so far this year, data compiled by Bloomberg show.
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