LONDON (Reuters) - Tight cash in global markets will put a lid on the stratospheric rise in dollar issuance of Islamic bonds this year, but will not stop its growth, the head of Islamic finance at Barclays Capital said on Monday.
"This year we will get 30 to 35 percent growth rather than the breakneck 100 percent growth that we've had over the last two to three years," Arul Kandasamy from the investment bank of Britain's Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) told the Reuters Islamic Banking and Finance Summit in London.
Of the approximately $30 billion worth of bonds compatible with Islamic law, or sukuk, issued last year, around $10 billion were in U.S. dollars, he said. Barclays Capital was the No. 1 bookrunner for dollar sukuk issuance both in 2006 and 2007.
"The size of those deals that we and other banks have been doing have been so large that by necessity you have to tap the international investor base," Kandasamy said.
Since liquidity became hard to come by, credit spreads have widened, putting off some borrowers in the Middle East. At the same time, some investors are holding on to their money due to concerns about what other problems markets may throw up or because they want an even higher yield.
But confidence in the Middle East remains strong.
"We are getting positive vibes from international investors about Middle Eastern credit, such as Tamweel, a UAE mortgage lender, while mortgage providers globally are being hammered."
BarCap arranged a $300 million convertible sukuk for Tamweel PJSC TAML.DU in December despite the mood among investors nearing rock bottom after half a year of market turmoil.
"The first quarter is probably not going to be as active as last year. There are a lot of issuers waiting on the sidelines," Kandasamy said, but added he did not expect issuance size to go down.
And Islamic bankers are still looking forward to a bright future, he said.
"There is absolutely a lot more that can be done," Kandasamy said, pointing to the huge Muslim populations in countries such as Indonesia, Pakistan, India and China.
"These are phenomenal markets and there is rapidly accelerating growth in the future."
(Editing by David Holmes)
© Thomson Reuters 2009. All rights reserved.
| India Investment | Nov 23 - 25, 2009 | Country Summits |
| Global Finance | Nov 16 - 19, 2009 | Financial Services / Exchanges |
| Health | Nov 09 - 12, 2009 | Health |
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
