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Sukuk issuance hit by global credit conditions

United Arab Emirates: Monday, September 15 - 2008 @ 10:27

Titled Sukuk in HI 2008: Key Trends and Highlights, the report indicates that issuance has fallen by 54% in H1 2008 compared to H1 2007. This is the first such drop since 2001, when the sukuk market started to take off.

In H1 2008, the total number of sukuk issued was 61, compared with 111 in H1 2007 and 77 in H1 2006.

In terms of value, H1 2008 tallied $11.55bn, compared to $25bn in H1 2007 and $13.67bn in H1 2006.

IFIS, owned by global publishing giant Euromomey Institutional Investor, confirmed that the impact of the credit crunch on Islamic markets has been severe, contrary to its own expectations at the end of 2007.

The 54% drop in the value of issuance in H1 2008 compared to H1 2007 has put to rest theories suggesting that Islamic finance is immune from the global credit environment.

According to the report, the drop in issuance confirmed that Islamic finance has become intertwined with global financial markets, and is in no way an isolated market.

Although South East Asia issued more sukuk than the Gulf Cooperation Council, the report also noted that for the first time, the GCC surpassed SEA in terms of total value of sukuk issued. IFIS had predicted this in its 2007 annual report.

Reflecting this development, the Malaysian Ringgit and the US dollar have had trouble maintaining their place as the top currencies for sukuk issuance.

The Ringgit held only 33% of the total value of issuance, with the dollar sliding to third place behind the Emirati Dirham.

Also noteworthy has been the drop in the number of Sukuk offerings worth more than $1bn.

The first half of 2008 saw only two such issuances, compared to 14 in all of 2007.

However, there has been no expansion in small and mid-sized issuances in the GCC, with all corporate sukuk bar one being worth more than $100m.

By contrast, Malaysia continues to have a large number of corporate issuances within the $1m to $10m range and the $10m to $100m range.

Surprisingly, Calyon was the top bookrunner for H1 2008.

Calyon had not been in the top ten bookrunners in the two previous years.

It was followed by CIMB Islamic and HSBC Amanah respectively.

The top ten global bookrunners’ list continues to be dominated by international banks, with a good showing for CIMB Islamic and Dubai Islamic Bank.

The Islamic Finance Information Service (IFIS) is the first professional strength information service designed to meet the unique requirements of Sharia compliant finance industry participants

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Monday, September 15- 2008 @ 10:27 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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