Liau Y-Sing and Yudith Ho Kuala Lumpur and Jakarta

FIRST-TIME sellers of bonds that adhere to Islam’s ban on interest are poised to revive an industry suffering its worst quarter in more than four years.

Luxembourg and Hong Kong aim to market debut offerings of sukuk next month, while Kenya, South Africa, Bangladesh and Tatarstan have announced plans for maiden issues. Islamic bond sales have fallen 82 percent to $2.6 billion (R27.7bn) this quarter compared with the previous three months, their lowest level since the first three months of 2010, according to data.

“All are seeking their share of fast-growing Islamic financial services activity,” Khalid Howladar, the global head of sharia-compliant finance at Moody’s Investors Service in Dubai, said on Tuesday. “Initial sovereign issuances test and sometimes force the development of a legal environment conducive to Islamic finance.”

Offerings of sharia-compliant bonds may top last year’s $43.1bn and challenge the unprecedented $46.5bn sold in the previous 12 months, according to CIMB Group Holdings, as an increasing number of non-Muslim countries tap the market. The UK sold its first sukuk in June, drawing bids for more than 10 times the £200 million (R3.5bn) on offer.

Islamic bond offerings have been subdued this month due to the summer holidays and the month-long Muslim fasting period of Ramadan. At $828m, it is the worst month in a year. Sales so far this year have gained 27.6 percent to $27.7bn.

Issuance would start to pick up, said Badlisyah Abdul Ghani, the chief executive of CIMB Islamic Bank, which is a unit of CIMB Group.

Luxembourg is planning to raise e200m (R3bn) by the end of next month, according to an August 11 statement from the finance ministry. The Hong Kong government would meet investors from Asia, the US, Europe and the Middle East from September 1 for as much as $1bn of sharia-compliant securities, the central bank said in a statement yesterday.

“Sukuk has gained in popularity as an alternative funding tool,” Angus Salim Amran, the Kuala Lumpur-based head of financial markets at Malaysia’s RHB Investment Bank, said on Wednesday. “The growing pool of sharia-compliant liquidity available to the global market is the impetus for these issuers.” – Bloomberg