Booming Islamic bonds mop up liquidity
Tuesday 1 March 2011 - by Andrew Hickley
Following a turbulent two years, Standard & Poor's has declared the sukuk market "back on track" after a record-breaking 2010 and a booming start to this year.
It states that sovereign sukuk could be used to mop up extra liquidity held by domestic banks, noting that the Qatari Central Bank did this in January 2011 with a $9.1bn (€6.58bn) issuance of sukuk. Overall it sees two thirds of the year's issuances in the Islamic bonds coming from Malaysia, Qatar and the UAE.
"We believe that given its economic resilience and bright prospects, the GCC region may catch up with Malaysia and begin to play a larger and more sustainable role in the market in the next five years."
While some western economies have shown interest in sukuk, the report judges that a complex web of socioeconomic, political and religious issues will hold back any swift uptake in sukuk in non-Muslim countries.
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