(MENAFN - Khaleej Times) Debut Islamic bonds from governments and companies seeking to cut financing costs will drive sukuk sales next year, according to HSBC Holdings, with issuance probably rebounding to a record.
Growth will be boosted as borrowers follow governments from Dubai to Malaysia, which are seeking to promote Shariah-compliant bonds and become centres for Islamic finance, said Mohammed Dawood, global head of sukuk financing at HSBC, the bank that managed the most sukuk sales in 2013. The London-based lender is also working to introduce new instruments to help the securities compete with conventional bonds, he said by phone on December 22.
Islamic bond sales fell 9.5 per cent in 2013 to 42 billion after reaching a record 46.4 billion last year, according to data compiled by Bloomberg, in a market dominated by repeat borrowers. About 60 billion of sukuk will be sold in 2014, primarily by Malaysia and the Gulf countries, Moody's Investors Service said in a report last month.
"In 2014, we will see a shift to new issuers," Dawood said from Dubai. "We will see a lot more coming out of Asia and a lot more issuance from outside of the traditional markets."
Financial centres around the world have announced plans to sell Islamic bonds as part of efforts to grab a greater share of an industry whose assets will more than double to 2.7 trillion by 2017, according to PricewaterhouseCoopers. Hong Kong, the world's fifth-largest currency-trading centre, said in November it will offer a debut sukuk to spur capital markets. In October, UK Prime Minister David Cameron said the country planned to sell Islamic notes.
"You have more debt maturities in 2014, especially in Dubai, so this will drive issuance," Montasser Khelifi, a Dubai-based senior manager for global markets at Quantum Investment Bank Limited, said by e-mail on Tuesday.
Issuers in the Gulf Cooperation Council (GCC) have about 32 billion of bonds and syndicated loans maturing next year, according to data compiled by Bloomberg. Among the debt is a 500-million note from Dubai due in November while Abu Dhabi's Tourism Development and Investment Co, which is building museums in the UAE capital, has to pay a 1 billion bond in July.
Dubai said this year it's seeking to become the capital of the global Islamic economy.
"The announcements that we have seen from the likes of Dubai and the region have really given the product a lot more awareness, particularly among international markets," Dawood said. "That has led to a whole series of enquiries and interest from countries, from issuers who otherwise would be not so obvious targets for sukuk issuance."