Gulf Times – Dubai sukuk drops on risk aversion, falling oil prices

Dubai’s Islamic bonds are dropping more than the debt of energy-rich Abu Dhabi and Qatar as investors shun the region’s riskier assets after slowing global economic growth crimps oil demand.

The extra yield investors demand to hold Dubai’s 6.396% bond maturing 2014 and the five-year 2.375 Treasury due the same year widened more than 100 basis points, or 1 percentage point, from its May 19 low to 446 basis points on Monday. The gap between Islamic bonds in the Gulf, home to about a third of the world’s oil reserves, over those in emerging markets rose six basis points in the past month to 36 on September 9, according to the HSBC/Nasdaq Dubai GCC US Dollar Sukuk Index and the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

“The short answer is that Dubai sold off in recent weeks as a result of global de-risking,” Ahmad Alanani, Middle East director at Exotix Ltd, said in an e-mail on Thursday. “Investors sold Dubai and bought the perceived safe haven bonds of Abu Dhabi and Qatar.” Dubai’s bonds make up about a quarter of the HSBC/Nasdaq GCC index.

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