What does 2010 hold for sukuk?

The primary sukuk markets will see growth this year according to both Moody's and KFH Research with the latter expecting over $30 billion in new issuance. KFH Research predicts, according to senior analyst Tursina Yaacob, that private sector projects will see a revival, especially in Asia. The sovereign Indonesian sukuk for $889 million that was recently issued (triple the planned amount on significant demand with a bid-to-cover of over 7 times) is the largest sukuk issued this year according to KFH. Moody's projects that the first half of the year will see sovereign, supranational and government-related sukuk issues (which were the largest share in 2009) make up the largest share before private sector issuance recovers in the second half of the year. Emirates Business 24/7 has a detailed analysis of Moody's predictions for issuance by country. The Moody's press release focuses on the impact of legislative and regulatory changes as a source of a boost in new issuance, particularly from the sovereign or quasi-sovereign issuers. In addition to the legal and regulatory changes, the Central Bank of Bahrain is providing training on banking to Shari'ah scholars, while the Bank Negara Malaysia, the central bank, is launching a new Shari'ah governance framework to be effective beginning in 2011.

The Financial Times recently provided a short FAQ on sukuk which is a good introduction. As a part of the legal and regulatory environment being changed to accommodate Islamic finance, the Monetary Authority of Singapore revised its banking regulations to clarify its position on istisna'a financing, which was described in the opening remarks at the Singapore Islamic Finance News Roadshow 2010. Business Week notes the planned sukuk issuances, which include a $1.9 billion issue from Saudi Electric Comapny. Ernst & Young also released its World Takaful Report which predicts that the takaful market will surpass $8.8 billion this year.

Dubai Civil Aviation used a new ijara facility in April 2009 to repay a portion of the maturing $1 billion ijara facility that was due at the time. Recently, the first of three equal installment payments of $227 million was paid on this ijara facility, which included three tranches (in Emirati Dirhams, US Dollars and Euros).

Other News

• The AFP has an article on UM Financial's new iFreedomPlus MasterCard.
  
• Kuwait Finance House is exploring investment opportunities in alternative energy over the next two years. It's expansion into Canada through a recent joint venture after amendments to the tax law and was delayed by the credit crisis.
  
• The International Investment Group, based in Kuwait, has defaulted on its $200 million sukuk and a dissolution event (for the trust) will occur if the sukuk default is not remedied within three days. The IIG sukuk was a mudaraba sukuk and was exchangeable into either shares in IIG or cash and was listed on the NASDAQ Dubai (formerly DIFX) in June 2007.