Islamic 2010 Dollar Bond Sales Likely to Match '09's $5 Billion, HSBC Says

Sales of dollar-denominated Islamic bonds may reach $5 billion this year, matching levels of 2009, led by Asia and Gulf Arab nations, said an official at HSBC Holdings Plc, the biggest underwriter of such debt this year.

The so-called sukuk market was “sluggish” in the first half of the year, Mohammed Dawood, director of debt capital markets at HSBC in Dubai said in an interview today. Offerings will “pick up” in the months to come as market conditions improve, he said.

Sales of Islamic bonds, including domestic issues, reached $4.6 billion this year, after rising to $20.2 billion in 2009, according to data compiled by Bloomberg. Standard & Poor’s said total sales of the securities may rise to $30 billion in 2010, approaching the record set in 2007.

“There is still a lot of liquidity within the Islamic markets,” Dawood said. The limited supply of sukuk “in the past eight to nine months has led to a build-up in assets and a pressure to deploy assets.”

Dubai World, one of the emirate’s three main state-owned holding companies, and its property unit, Nakheel PJSC, are seeking to renegotiate terms on a combined $24.8 billion of borrowings after roiling global markets by proposing a freeze on loan repayments in November. Islamic debt sales slumped 43 percent to $1.2 billion in the first-quarter from a year earlier, Bloomberg data shows.

Nakheel transferred $980 million on May 13 to repay Islamic debt maturing the same day, according to a Dubai government spokeswoman. Islamic bonds are asset-based securities that pay a profit rate to investors to comply with Shariah law’s prohibition on interest payments.

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

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