Islamic bond issues seen dropping further

Points of Essence:

• Sukuk issuance is  facing a tough year ahead as the worst is not yet over with the weakening global economy and shattered confidence in the Islamic bonds throughout last year are still looming in the background. The proposed issuances by Japan, Indonesia and Thailand have been put on hold amid these uncertainties thus further painted a bleak future for the Sukuk industry. It’s still uncertain whether the recently launched Singaporean Sukuk will survive the rough tides.  The Financial Times has the report.

By John Burton in Singapore

The issuance of Islamic, or sukuk, bonds is expected to drop for a second consecutive year in 2009 because of the global credit crisis, dashing the hopes of the Islamic finance industry that problems in the western banking systems might benefit its products.

Islamic finance body backs divisive sukuk ruling

Points of Essence:

• AAOIFI stressed that the forbidden repurchase agreement in Islamic bonds will spur innovation in Islamic finance. The organization created a stir last year for its outlawing of the repurchase agreement. The sukuk issuance had since dipped to its deepest level mostly triggered by this ruling. Reuters has the report.

KUALA LUMPUR, Nov 19 (Reuters) – A ruling forbidding repurchase agreements in some Islamic bonds will help develop Islamic finance, an industry body said on Wednesday, offering support for a controversial view that has roiled the sukuk market.

Sukuk to recover in 2009 – BNP Paribas

Points of Essence:

• Islamic Bonds issuance will gain momentum in the second quarter 2009 after a dismal showing in this year, said BNP Paribas. It will exceed $50 billion worth of issuance subject to the stability of the financial market. Reuters has the report.
  

SUKUK RECOVERY: BNP Paribas said the issuance of Islamic bonds could recover next year. (Getty Images)

by Reuters Tuesday, 11 November 2008

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.

Islamic bond market ‘wrecked’ by critical remarks

Points of Essence:

• The sudden fall of the Islamic bond market was attributed to a strong Shariah view from a prominent Shariah scholar questioning the compliance of the bonds with the Shariah requirements. Sheikh Muhammad Taqi Usmani has since been blamed for the rapid decline of the bond issuance from $50 billion to just S14 billion last year.

MAJOR UNCERTAINTY: File photo of a speaker at an Islamic Finance conference.

by Jason Benham

Debates over how sharia-compliant Islamic bonds really are have “wrecked” the sukuk market, causing issues to fall to $14 billion this year from up to $50 billion last year, a leading expert said on Tuesday.

“The statements that were made by our sharia chairman about the sharia compliance of sukuk wrecked the market,” said Mohamad Nedal Alchaar, secretary-general of the Accounting and Auditing Organization for Islamic Financial Institutions.

Sheikh Muhammad Taqi Usmani, chairman of the board of scholars