Islamic bond issuance last year surpassed pre-crisis levels for the first time – after more than doubling in volume – while one bookrunner predicted momentum will continue with a further 50% rise in 2012.
The volume of sukuks, or bonds that are Shariah-compliant, issued during the year rose to $32.6bn, from $14.9bn in 2010, with roughly half the volume of deals occurring in the fourth quarter, according to data from Dealogic. It was the first time volume surpassed pre-crisis levels.
The bonds benefitted from uncertainty in the global market, which drove investors to more stable issuances, according to HSBC Amanah, which was the fourth largest bookrunner last year. The firm said it expected the momentum to continue into 2012, anticipating a total of $44bn in deals this year.
Despite a rise in the number and volume of deals in the Middle East last year, Malaysia remained the dominant nationality of deals, with the year’s five largest sukuks issued by the country’s government or corporates.
There were $25.4bn of Malaysian sukuks issued during the year, while Malaysian financial services firm CIMB Group was the top bookrunner with $7.9bn in proceeds.The largest deal last year was a $6.1bn sukuk issued by an investment holding company owned by the Malaysian government treasury, Khazanah Nasional.
The United Arab Emirates represented the second most popular country for bond issuance with $2.6bn in deals during 2011, according to Dealogic.
Government-related sukuks will continue to dominate the market in 2012, according to a year-end HSBC Amanah forecast, with Asian and Middle Eastern infrastructure projects acting as major drivers. Malaysian toll and highway firm Projek Lebuhraya Usahasama Berhad kicked off the year by announcing that it would issue a massive $9.7bn sukuk.
Middle East banking group Emirates NBD and First Gulf Bank both had $500m issuances in the first two weeks of January. Dubai Islamic Bank had a $300m issuance.
Mohammed Dawood, managing director of Islamic global markets for Emea at HSBC Amanah said demand has continued outstrip supply in January, which has been the busiest start to the year he’s seen.
“Sukuk is favoured by investors because it has been less volatile than conventional issuances, especially in the last four months of 2011. Issuers on the other hand, like sukuk because it gives them access to a new investor base,” Dawood said in HSBC’s projections for the new year.