Saudi seen leading 2010 sukuk issuance

DUBAI (Reuters) - Sukuk bond issuance in the Middle East will range between 10 and 15 in 2010, with demand mainly expected to come from Saudi Arabia, said Mohd Daud Bakar, managing director of Amanie Islamic Finance Consultancy and Education LLC.

Speaking at the Reuters Islamic Finance Summit in Dubai Wednesday, Bakar said Saudi Arabia will lead the sukuk pipeline this year as it funds infrastructure projects.

Bakar said the kingdom has the economy and population to support such projects. He added that his firm has two to three mandates for sukuk issues in 2010, mainly coming out of the kingdom.

"I'm looking at two or three sukuk issues," he said. "There should be 10 to 15 sukuk issued throughout this year by the corporates in the Middle East, at least $400 to $500 million each if not more."

Bakar said the sector would see some slowdown in the wake of the global economic crisis, Dubai's debt problems and a rash of problems at Islamic financial institutions, but the outlook was not all bad.

"Growth is still positive but we have to expect some slowdown in corporate sukuks as well as the public mutual funds," he said, adding government and quasi-sovereign names would help fill the gap.

Saudi Arabia is seen as the biggest market for activity this year with industry players keen to make a wider push into the world's largest oil exporter.

Deutsche Bank (DBKGn.DE) plans to bring a "major" Islamic bond in Saudi Arabia by the end of the first quarter, according to its head of structuring for Middle East and North Africa and Barclays (BARC.L) wants to expand its presence in the kingdom.

Earlier this month, Dar al-Arkan 4300.SE, Saudi Arabia's biggest property developer by market value, raised $450 million in the first international issue from the Gulf Arab region since the Dubai debt crisis unfolded.

Saudi Arabia's population has risen to over 25 million, according to government estimates, posing a challenge to the government in terms of providing jobs and housing.

Annual housing demand may hit 160,000 new units each year with up to 50,000 units in unmet demand, according to Egyptian investment bank EFG Hermes.

KOREAN FORAY

Bakar, a prominent sharia scholar, has been consulting South Korea's Korea Investment & Security Co. to help structure Islamic finance products ahead of a proposed bill to exempt sukuks from tax on distribution.

He said if the legislation passes, the industry could see the first South Korean corporate sukuk as early as 2010 or 2011.

South Korea has lagged behind other Asian countries such as Malaysia and Indonesia in entering the Islamic finance market. But the country has expressed interest in jumping in. The Korean bourse indicated in November that it was open to introducing an Islamic equity index to tap into the growing space.

Passage of the bill, which will tackle issues such as double stamp duty and value added tax, is necessary for issuers to consider offering ijara sukuk products Bakar said.

(Reporting by Shaheen Pasha; Editing by Hans Peters)