Sukuk sales seen tepid,Malaysia to shine-AmInvestment

KUALA LUMPUR Wed Aug 5, 2009 5:22am EDT

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KUALA LUMPUR Aug 5 (Reuters) - Global Islamic bond issuance in 2009 is likely to be around last year's $14.25 billion level, with sales in Malaysia expected to account for more than half, the world's top sukuk manager said on Wednesday.

Government issuance and funding for infrastructure projects would drive sales, said AmInvestment Bank head of Islamic Markets Mohd Effendi Abdullah.

Issuance from Malaysia, the world's largest Islamic bond market, is expected to total at least $8.3 billion in 2009, compared with $6.3 billion in 2008 and $17.7 billion in 2007, Effendi said.

"We have quite a number of sukuk in the pipeline but issuers are still quite cautious," he said on the sidelines of an Islamic banking conference in Kuala Lumpur.

"Sovereign and government-related issuance will be driving the market."

Ijara, musharaka and mudaraba are expected to remain popular sukuk structures, he said.

AmInvestment is part of Malaysia's No. 6 lender AMMB Holdings (AMMB.KL), which was the world's largest Islamic bond manager in the first half of 2009, handling more than $2 billion of issuance, according to Thomson Reuters data.

The value of sukuk issued globally fell more than 56 percent from 2007 to $14.9 billion, according to Standard & Poor's. Bankers attributed the drop to the credit crunch and a controversial ruling by a top cleric declaring that more than half of sukuk were un-Islamic.

But recent strong demand for Indonesia and Bahrain's sovereign sukuk issuances have sparked hopes of a recovery in the sukuk market.

Kuwait Finance House (KFIN.KW) said on Monday it sees new global sukuk sales at between $15 billion to $18 billion in 2009.

Still some bankers and lawyers say the outlook is clouded by the debt restructuring at Saudi firms Saad and Ahmad Hamad Algosaibi and uncertainty over strength of the global economic recovery.

Regulators and bankers are grappling with the fallout from the multi-billion dollar debt restructuring at the two businesses, which are seen as the biggest blow to hit the Middle East since the start of the global financial crisis.

Standard & Poor's has estimated that 30 Gulf Arab banks had a combined exposure of $9.6 billion to the two Saudi firms.

($1=3.486 Malaysian Ringgit)

(Click on [ID:nISLAMIC] for more Islamic finance stories and ISLAMIC for a speed guide) (Reporting by Liau Y-Sing; Editing by Kazunori Takada) ((y-sing.liau@thomsonreuters.com; Reuters Messaging: y-sing.liau.reuters.com@reuters.net; +603 2333 8083)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

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