#Saudi Ambition Helps Islamic Bond Market Evade the Global Gloom - Bloomberg

Saudi Ambition Helps Islamic Bond Market Evade the Global Gloom - Bloomberg

While doom and gloom grip emerging debt markets amid fears of recession and defaults, Saudi Arabia’s sukuk deals are booming.

The kingdom’s domestic-market sales of sukuk -- debt issued under Shariah, or Islamic religious law -- has hit $14.4 billion, up 185% from last year, according to data compiled by Bloomberg. That accounts for more than half of global domestic sukuk sales, and the Saudi government alone sold more than 60% of it.

Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler, launched his Vision 2030 plan six years ago to overhaul the Saudi economy and end its reliance on oil. Financing the project is helping cushion the sukuk market from a global downturn that saw eurobond sales drop by more than half this year. Also fueling sales is investor demand for local assets as global debt suffered losses, as well as the central bank’s injection of cash into banks to ease a liquidity crunch.

“There are a lot of projects going on in Saudi driven by their 2030 vision to diversify their economy away from oil. These all need funding,” said Doug Bitcon, the Dubai-based head of credit strategies at Rasmala Investment Bank. “Local investors are familiar with the local companies and they can often raise liquidity at fine spreads.”