Dubai’s Islamic bonds, after beating sukuk from Malaysia this quarter, may face limited gains because the restructuring of Dubai World’s $24.9 billion in debt requires asset sales over eight years.
“I don’t think there will be a run-away rally here,” Abdul Kadir Hussain, chief executive officer in Dubai at Mashreq Capital DIFC Ltd., which manages $2 billion of mainly Persian Gulf assets, said in an interview yesterday. “Refinancing risk will occur in five and eight years obviously and the market will continue to see this.”
The yield on the Dubai Department of Finance’s 6.396 percent Islamic debt due in 2014 dropped 15 basis points to 6.42 percent yesterday, after falling by six on Sept. 10. The notes returned 5.9 percent this quarter, compared with 3.8 percent for Malaysia’s 3.928 percent sukuk due June 2015, according to data compiled by Bloomberg.
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