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Tue 14 Apr 2009 07:16 AM

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Foreign demand for Islamic bonds set to rise 2010 - expert

Foreign investors are expected to start tapping Gulf Arab markets next  year.

Demand for Islamic bonds, or sukuk , will increase from next year when foreign investors are expected to tap Gulf Arab markets, an executive said on Monday.

Simon Eedle, managing director of Global Islamic Banking at Calyon, told the Reuters Islamic Banking and Finance Summit in Bahrain that foreign investors would be issuing sukuk to tap the Gulf Arab region's ample liquidity compared with other markets.

"Once we got the market functioning ... there is going to be a huge opportunity for the right sectors and the right names to ... tap that Islamic wealth," he said.

He said a new investor base in the Gulf Arab region is emerging that includes pension funds and Islamic insurers.

The regional sukuk market so far has been dominated by real estate-related issues that were bought by investment banks.

He said regional sovereign issues were mostly distributed to international investors, with regional demand remaining unsatisfied.

"A lot was distributed outside, there are many people in the region struggling to get that paper," he said.

Eedle said that he does not expect the sukuk market, which has been lying idle since the global financial crisis reached its peak late last year, to pick up again this year.

"I'd be surprised if there were many big deals done this year, it's more waiting to see where the market is going, but everything is taking a lot longer than we thought," he said.

Calyon is the investment banking arm of Credit Agricole. (Reuters)

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