New Asian Islamic bonds revitalise sukuk market

New sales of Islamic bonds or sukuk, by Asian governments such as Indonesia are revitalising the market, ratings agency Moody’s said in a report published yesterday.

“Sovereign sukuk issuance has already brought significant vitality to the Asian market in 2009. In the medium term this could allow activity to fully rebound,” Moody’s said in its report titled “Islamic Finance: Asian sukuk market faces new but also familiar challenges.”

Last week, the government of Indonesia issued its first international dollar sukuk, raising US$650 million (Dh2.3bn). The bond was seven times oversubscribed. In compliance with Shariah, sukuk pay investors in form of asset returns instead of interest. The strong demand for the Indonesian sukuk by Gulf-based institutional investors shows that regional appetite is returning, experts say. It also highlights the absence of good quality paper in Islamic credit markets.