Nasdaq Dubai will “easily” become the world’s largest sukuk market by next year, acting CEO Hamed Ali told Arabian Business.
Billions of dollars worth of sukuk – Sharia compliant Islamic bonds - are expected to be listed on the Nasdaq this year and in 2014, helping to propel it from being the third largest sukuk market globally to the first.
“If we consider the activities expected in the market this year and next year we can easily become number one within the coming one to two years,” Ali said.
“Our plan is very strong for this year and potentially next year, it keeps on growing. If we end up attracting between 20 to 30 percent of that we’re easily number one.”
Prime Minister and Ruler of Dubai Sheikh Mohammed bin Rashid announced last month the emirate’s intention to become the leader in sukuk.
Nasdaq Dubai will need to issue nearly US$20 billion worth sukuk – twice as much as it presently has - in order to take over London as the largest market for the bonds.
London has an estimated US$27 billion worth of sukuk, followed by Malaysia with US$23 billion. Dubai is estimated to have at least US$10 billion worth of sukuk.
Financial experts estimate the global value of sukuk to be about US$400 billion and growing.
Last year total Islamic bond sales reached US$21.2 billion. The UAE was the largest issuer and Standard Chartered said in a report earlier this month it expected the impetus for sukuk to continue to be led by the emirates, as well as Qatar, where issuance is steadily increasing.
However, the report also said the level of issuance was unlikely to continue at the same heights in 2013.
During the first two months of this year Arabian Gulf sukuk issuances totalled US$2.1 billion, compared to US$8.3 billion during the first quarter of last year, according to Standard Chartered.
Since then, Dubai Electricity and Water Authority (Dewa) and Dubai’s flagship carrier Emirates have each listed a US$1 billion sukuk on Nasdaq Dubai.
Ali said the Emirates’ decision to issue its sukuk with Nasdaq Dubai was a strong recommendation for the market and showed it met international issuers’ expectations.
He expected the momentum to continue in 2013.
“It’s asset-backed security, so for many investors it is something that gives them a better guarantee. [Also], for many Sharia-compliant funds sukuk is a good option for them,” Ali said.
Nasdaq Dubai was particularly benefitting from the increasing value in sukuk because it was located in the Middle East, where a significant proportion of sukuk investors are based, and it had international regulatory standards, he said.
“Nasdaq’s regulation framework is in line with London and the key exchanges globally,” Ali said.
“We are the only exchange in the region that offers such a platform [so] we become a natural choice.”