Yields on global Islamic bonds are approaching record lows, signalling supply is falling short of demand from investors even after sales doubled this year.
Global offerings of Sharia-compliant notes climbed to $15.9 billion (Dh58.39 billion) in 2011 from a year earlier, approaching the $17.6 billion issued during the whole of last year, according to data compiled by Bloomberg. Yields dropped for a fifth month to an average 3.66 per cent on Friday, within 33 basis points of the record low of 3.33 per cent on December 31, 2004, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows.
Asia and the Middle East will keep attracting foreign investment as economic growth outpaces that in developed markets this year, according to Jakarta-based P.T. Danareksa Investment Management and Franklin Templeton Investment Management Ltd. Oil prices above the five-year average are boosting demand for sukuk in the Gulf Cooperation Council nations after Dubai World, one of the emirate's three main holding companies, and Nakheel PJSC restructured debt.
"Inflows into emerging markets will continue because our economies are more resilient," Oskar Syahbana, a money manager who helps oversee the equivalent of $1.3 billion of assets at Danareksa Investment, said in an interview.
Article continues below
"Demand for sukuk will always be there because the supply is still very limited," he said, adding that the average yield may fall to a new low.
The average yield on global sukuk dropped 25 basis points, or 0.25 percentage point, this month to the lowest since February 2005, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. The difference between the average yield for Islamic debt and the London interbank offered rate narrowed 20 basis points from the end of last month to 208 basis points on Friday, the measure shows.