Published April 29, 2009

Islamic bonds could top US$10b this year

Oversubscription of Indonesian sukuk suggests demand

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(KUALA LUMPUR) Malaysia's capital market regulator yesterday estimated that global Islamic bond issuance this year would be worth at least US$10 billion.

Ms Zarinah: Told an Islamic finance conference that there was demand in the global Islamic bond market

That would suggest a slide in issuance compared with 2008, which itself showed a sharp decline in issuance from 2007.

However, Securities Commission chairman Zarinah Anwar told an Islamic finance conference that there was demand in the market, as reflected in the oversubscription of Indonesia's sovereign sukuk in April.

Indonesia sold US$650 million in global Islamic bonds at a yield of 8.8 per cent. The order book attracted more than US$4 billion, sources in Asia said at the time.

New sales of Islamic bonds fell to US$15.77 billion last year from US$46.65 billion in 2007, the Islamic Finance Information Service (IFIS), which tracks data in the Islamic finance industry, says.

The decline in new issues partly reflects the global downturn since the financial crisis blew up, causing a lot of investment flowing into the Islamic debt market to slow down.

In addition, differences in Islamic banking standards and practices have made it more difficult to sell products across borders.

Malaysia has the world's largest Islamic bond market. -- Reuters