May 26, 2011 / 11:58 AM / 8 years ago

UPDATE 1-HSBC MEast launches $500 mln sukuk, pricing Thursday

* HSBC seeks to tap demand for Islamic debt

* Sukuk launches at lower end of price guidance

(Adds launch, size details)

DUBAI, May 26 (Reuters) - HSBC’s (HSBA.L) Middle East unit launched a $500 million Islamic bond at 155 basis points over midswaps, the lower end of an earlier guidance, with final pricing expected later Thursday.

HSBC Middle East, a subsidiary of the U.K.-based lender, held roadshows this week in Asia, the Middle East and London gauge sentiment for a five-year Islamic bond, or sukuk as the lender looks to tap demand for Islamic paper. [ID:nLDE74N02C]

It had earlier set a guidance of 155-160 basis points over midswaps for the sale.

Demand for sukuk has outweighed supply in recent months, as regional unrest and wide spreads have kept issuers at bay. However, yield spreads have narrowed of late as sentiment, particularly for Gulf paper, improves.

In October 2010, HSBC Middle East raised $500 million from a conventional five-year bond issue at 3 percent. [ID:nLDE69D1VD]

Gulf borrowers Sharjah Islamic Bank SIB.AD and Islamic Development Bank (IDB) both issued sukuk earlier this month, opening up the regional Islamic bond market which has been subdued for months. [ID:nL4E7GI2E3] [ID:nLDE74H1NW] The strong pipeline of sukuk issuance from the region includes potential bond sales in 2011 from Qatar Islamic Bank (QISB.QA) and Bahrain’s Al Baraka Bank BARKA.BH, among others. (Reporting by Rachna Uppal; Editing by Dinesh Nair)

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