Islamic bonds, known as sukuks, have more than doubled their share of the Gulf bond market from 14% to 32%, according to international law firm Trowers & Hamlins (T&M). The State of Qatar's Global Sukuk issue, which closed in October 2003, was so popular that its size was increased from $500 million to $700 million, while the Dubai's Department of Civil Aviation recently announced the biggest ever sukuk issue, amounting to $750 million.
T&M says that an increase in the oil price has increased liquidity and driven the demand for debt in the region. Foreign investors are now more confident that the regional economy will enable borrowers to service their debt.
T&M partner Andrew Rae says that foreign investors are increasingly forming a bigger percentage of the market as they become more familiar with the differences between the countries in the region. ?Foreign investors are looking at corporate issuers, not just sovereign debt, and are increasingly comfortable with the fastest growing area of bonds ? shariah compliant sukuks,? he says.
Rae also thinks that regulation in the gulf region is developing more in line with commercial realities. ?It's a much better balance between regulation and facilitation,? he says.