Gulf International, Abu Dhabi plan Malaysian Islamic bond issues

Reuters, Thursday 21 Jul 2011

Gulf banks and government departments are planning to issue sukuks in Malaysia currency to take advantage of the world's largest market for Islamic bonds

An Abu Dhabi government department and Bahrain's Gulf International Bank are planning ringgit-denominated sukuk issues in Malaysia, as Middle Eastern issuers seek to diversify their funding options, sources said on Thursday.

Gulf International Bank, a conventional wholesale bank, has begun work on a ringgit sukuk programme which would allow it to raise at least $1 billion, sources said.

Abu Dhabi's transport department is considering a ringgit Islamic funding programme in the Southeast Asian country but has yet to mandate any banks for the deal, the sources said.

"Quite a number of Middle East issuers are looking at the Malaysian market," said one of the sources who declined to be identified because the deals have not been announced.

Officials from Gulf International Bank and Abu Dhabi's transport department were not immediately available for comment.

As a conventional lender, Gulf International Bank would be required to fulfill regulations in Malaysia which require sukuk issuers to use the proceeds for sharia-compliant purposes, the sources said.

Several Middle Eastern issuers have tapped Malaysia's sukuk market, the world's largest, in the past year.

In February, Kuwait-based Gulf Investment Corporation (GIC) sold 600 million ringgit ($200 million) of five-year Islamic bonds in Malaysia at a yield of 5.25 percent.

National Bank of Abu Dhabi (NBAD), the UAE's largest lender by market value, launched a 10-year 500 million ringgit Islamic bond in December, its second ringgit bond during the year.

Sources have also said Dubai plans to issue about $1.5 billion in sovereign sukuk in Malaysia.

Bankers expect Islamic bond issuance to pick up in the second half, with Gulf issuers returning to the market after political uprisings in the region had virtually halted the bond market.

Recent sukuk issues that have been oversubscribed include the $2 billion sovereign issue from Malaysia, HSBC Middle East's $500 million sale in May, and Sharjah Islamic Bank's $400 million issue.

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