Sukuk to recover in 2009 - BNP Paribas

The issuance of sukuk, or Islamic bonds, is expected to pick up in 2009 and could exceed levels from 2007 after a dip this year, BNP Paribas' head of Middle East debt capital markets said on Tuesday.

Sukuk issues, which have fallen to around $14 billion this year, could pick up in the second quarter of 2009 and exceed last year's $50 billion figure as long as market conditions stabilise, Mark Waters told newswire Reuters.

"The pipeline is very strong on both conventional and sukuk issuance for all market players," said Waters, speaking on the sidelines of a conference.

"I think you'll see a number of [Gulf] states, in particular Saudi Arabia and Kuwait, that will lean more heavily on sukuk structures than perhaps they would conventional bonds so I think those numbers are achievable."

Waters said that an increase in the number of new bond issues in the US and European markets over recent weeks would help spur activity in the Gulf Arab region.

Bond sales have almost dried up in the second half of this year as the global credit squeeze raised borrowing costs, prompting many Gulf borrowers to shelve sukuk sales as banks become more reluctant to lend.

Sukuk are designed to comply with an Islamic ban on the receipt of interest. Instead, returns are derived from underlying physical assets, such as property. (Reuters)

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