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Sales of Islamic bonds may increase 24 per cent this year, led by Southeast Asia, as the region’s expansion helps drag the world out of recession, said CIMB Group Holdings Bhd, the leading arranger of such issuance.

Global sales of bonds that comply with the religion’s syariah principles, known as sukuk, will probably reach US$25 billion this year, Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd, a unit of CIMB Holdings, said in an interview yesterday. Gulf issuance will fall after Dubai World’s attempt to reschedule US$22 billion of debt eroded investor confidence, he said.

“Economic growth will trigger the need for funding,” said Badlisyah, whose bank handled 22 per cent of global sukuk sales in 2009. “Most sales will come from this part of the world,” with countries including Indonesia and Thailand “moving aggressively to facilitate the industry,” he said.

Sukuk sales rose to US$20.15 billion last year from US$14.13 billion in 2008, according to data compiled by Bloomberg. Islamic finance bans the payment of interest and stipulates agreements be based on the transfer of goods or services.
The Islamic finance industry’s assets under management may swell to US$2.8 trillion by 2015 from about US$1 trillion as Muslim wealth increases, according to the Kuala Lumpur-based Islamic Financial Services Board. The assets of the top 500 Islamic banks expanded to US$822 billion last year from US$639 billion in 2008, Standard & Poor’s said Feb. 1.

Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea and Singapore, will grow 8.1 per cent this year, faster than a November estimate of 7.8 per cent, the World Bank said on Jan. 21.

Malaysia Dominates

Malaysia, which accounted for about half global sukuk sales in 2009, will continue to dominate the sales, followed by Indonesia, which has the world’s largest Muslim population, Badlisyah said.

Thailand plans to sell as much as 50 billion baht (US$1.5 billion) of Islamic bonds in the third quarter to fund infrastructure projects, the Islamic Bank of Thailand said on Feb. 1. Indonesia plans to sell 3 trillion rupiah (US$319 million) of Islamic bonds to individuals this month, the finance ministry’s debt management office said in January.

Malaysia has eased foreign ownership rules and approved new products as part of efforts to become a hub for Islamic financial products. It also plans to issue new Islamic banking licenses and two new permits to sell Islamic insurance.

Thailand will introduce new rules in the first quarter to allow local companies to sell Islamic bonds for the first time to provide them with a new source of funding, the country’s Securities and Exchange Commission said in November. -- Bloomberg

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