Saudi Arabia can overtake Malaysia as the largest issuer of Islamic bonds for the first time in 2011

Saudi Arabia can overtake Malaysia as the largest issuer of Islamic bonds for the first time in 2011 and 1.44 in the kingdom stimulus plan one trillion rials (384 billion U.S. dollars) increased spending.

Saudi Electricity Co., the largest utility in the Arab world by market value, will finance more than 30 million riyals (U.S. $ 8 billion) of projects, Director General Ali Al-Barrak, said in an interview Dec. 14 . Saudi International Petrochemical Co. said Dec. 14 it can sell as many as 2 million debt materials compatible with the Sharia in the first quarter. Sukuk borrowers in the largest Arab economy totaled 2.3 billion U.S. dollars this year, compared with 7.3 billion U.S. dollars in sales of local currency debt in Malaysia.

"The Saudi market could easily become the largest issuer of sukuk simply because Saudi sukuk are much bigger," Tariq Al-Rifai, director of Islamic market indices in Dubai by Dow Jones Indexes, part of a joint venture 90 percent owned by CME Group Inc. and 10 percent of News Corp. 's Dow Jones & Co., said in an emailed response to questions from 17 December.

The world's largest exporter of oil in August announced a five-year development plan to stimulate economic growth, create jobs and diversify its economy from hydrocarbons. Kingdom borrowers are taking advantage of Islamic debt market to fund expansion, John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said on 16 December.

"Unique position"

Saudi state-controlled electricity and Dar Al Arkan Real Estate Development Co., the largest Saudi developer, led the Gulf sukuk sales this year.

Electricity sold 7 million Saudi riyals to 20-year Islamic bonds in May by 95 basis points more than three months of the Saudi riyal interbank offered rate. Investors put 27 billion rials of tenders, the company said May 12.

Dar Al Arkan sold $ 450 million sukuk in February. National Commercial Bank, Saudi Arabia's largest lender, will sell its first sukuk in the second quarter, executive vice president Elkhraijy Abdulrazzak said Nov. 22.

Companies in the kingdom are in a "unique position to raise capital much more cost competitive than anyone else in the region due to low risk profile of Saudi Arabia," Sfakianakis said in a telephone interview. "There is no doubt that 2011 will be a strong year for private sector growth."

Sales Sukuk

Economic growth in Saudi Arabia accelerated to 4.5 percent in 2011 from 3.4 percent this year, the International Monetary Fund in its World Economic Outlook report in October. The country, which holds 20 percent of the world's proven oil reserves, is rated Aa3 by Moody's Investors Service and AA-by Standard & Poor's, the fourth highest rating.

Islamic bond sales from six issuers in the six countries of the Gulf Cooperation Council declined 32 percent to $ 4.5 billion in 2010, at least since 2005, after the restructuring of debt defaults and falling price of the property damage investor confidence.

10-year initiative of the Malaysian government for private projects directed from a nuclear to a metro network will drive sales of Shariah-compliant debt, Kuala Lumpur-based RHB Investment Management Sdn. 'S CEO said Ali Sharifatul Hanizah said Dec. 15.

"There is more demand from local investors for Malaysian ringgit sukuk is local demand for sukuk in the Middle East," Naji Nabaa, a deputy director of Dubai-based fixed-income sales for the Middle East and North Africa Exotix Ltd., an investment bank specializing in asset infrequently traded, said in a telephone interview yesterday. "Malaysia will continue to dominate the sukuk market in 2011 in terms of number of issued Islamic bonds."

The gap reduction

The extra yield investors demand to hold sukuk Dubai government in place in Malaysia fell 46 basis points this month to 344. The performance of Dubai sukuk 6.396 percent Notes due November 2014 fell 3.6 basis points to 6.54 percent today.

compatible with the debt in the GCC Sharia returned 12.9 percent this year, HSBC / NASDAQ Dubai GCC U.S. Dollar sukuk index shows. Global sukuk returned 12.2 percent this year, according to the HSBC / NASDAQ U.S. Dollar Dubai sukuk index. Bonds in developing markets gained 11.4 percent, JPMorgan Chase & Co. 's EMBI Global Diversified index shows.

Rial sukuk

The difference between the average yield for new sukuk market and the interbank offered rate in London fell 61 basis points this month to 300 on December 17, according to the HSBC / NASDAQ U.S. Dollar Dubai sukuk index. In the GCC, including Qatar, the UAE and Kuwait, the gap narrowed by 67 basis points to 372 on 17 December.

petrochemical producers in the Persian Gulf to invest $ 50 million in 2015 and increase production by 46 percent to 154 million tons annually during the period, Abdulwahab al-Sadoun, general secretary of the head of the Gulf Petrochemicals and Chemicals Association , said in Dubai in December. 6. Most investments are expected to be made in Saudi Arabia, he said.

"Saudi Arabia and smaller service companies will be most likely in sukuk Rial, only because domestic demand is there," said Al-Rifai.