No time like the present to issue Sukuk (By IFN)

GLOBAL: For corporates looking to raise funds, it appears that there is no time like the present to tap the Islamic bond market as yields on Shariah compliant corporate debt catch up to that of government Sukuk.

Data from the HSBC/Nasdaq Dubai Sukuk Corporate Index shows that the average yield on corporate debt has declined 154 basis points (bps) to 3.76% this year, outpacing the decline in the yields of government Sukuk, which have fallen 34 bps to 3.56%. The spread between corporate and government Sukuk has tightened to 20 bps this year, the tightest since February 2010.

Strong demand for debt from the Middle East corporates, backed by expectations of economic resilience, is also set to drive the yield on corporate debt down further, said fund managers.

The continued dearth of Sukuk from the region, despite issuances from the Middle East in the first half of this year amounting to the most since 2008, also leaves room for further offerings; as debt issuances from the region as a whole showed a 45% quarter-on-quarter slowdown to US$6 billion in the second quarter of this year, according to market data.
In addition, data shows that the market for syndicated lending in the Middle East shrank 98% year-on-year in the first half of this year; showing the slowest period for the market in more than ten years.

While global Sukuk sales this year are already almost double that issued in the same period last year; and set to surpass last year’s record of US$36.7 billion, continued strong demand for the papers mean investors are ripe for the picking. With market conditions also attractive, issuers need no longer wait in the wings and should strike while the iron is hot.

See: http://redmoney.newsweaver.co.uk/1br6t0f7j9zh38rwoni3wx?email=true&a=6&p=25676605&t=21610735