Islamic bond sales jumped 70% last year as borrowers led by Gulf Arab companies sidestepped the credit market slump triggered by record defaults on US home loans.
Global sales of so-called sukuk rose to $30.8bn, from $18.1bn in 2006, according to data compiled by Bloomberg. Borrowers in Gulf nations including Saudi Arabia and the United Arab Emirates sold $17.9bn of the securities, 75% more than last year.
“Most sukuk sales come from the Middle East and Asia, which are firing on all cylinders while the US and Europe are hampered by the subprime crisis,” Arul Kandasamy, Dubai-based head of Islamic finance for Barclays Capital, said in a phone interview from Malaysia yesterday. “It’s also a much newer market that’s been showing explosive growth for about three years.”
Saudi Electricity Co, the kingdom’s largest power producer, and Aldar Properties PJSC, Abu Dhabi’s biggest property developer, were among companies selling sukuk for the first time, spurred by economic growth as oil prices soared.
In the European bond market, sales fell by 1% from 2006, their first decline since 2000, after companies abandoned plans as borrowing costs jumped to a five-year high.
HSBC Holdings, the biggest manager of sukuk sales worldwide this year after Malaysia-based CIMB Bhd, in October started the first index of Middle East corporate bonds, including Islamic securities.
Trading in regional debt jumped more than fourfold in the first half as overseas investors were attracted to the market, according to Neil Foster, HSBC’s head of global markets for the Middle East.
Nakheel, business park operator Jebel Ali Free Zone FZE and the Ras al-Khaimah Investment Authority were among UAE sellers of Islamic bonds in the second half.