Benzinga Snapshot On Islamic Bonds (Sukuk): Going Strong In 2010?

With the economy showing signs of a rebound, more corporates are expected to tap the debt market to fund their operations and deals. The sukuk market, which has been gaining ground since the second half of 2009, is expected to chart stronger growth in 2010, buoyed by the global economic recovery, low interest rates and the Government's pump-priming initiatives. However, Korea's plan to tap into the Islamic finance market faces a setback as a parliamentary committee failed to approve a bill aimed at relieving tax burdens that have virtually blocked local companies from selling Islamic bonds. A subpanel of the National Assembly's Strategy and Finance Committee on Tuesday decided to put on hold a vote on the government proposal to exempt tax on profit distributions from Islamic bonds, or sukuk. Source Confusion over Gulf sukuk bankruptcy rules: The recent near-default of Nakheel's Islamic bond has triggered calls for better bankruptcy rules in the Gulf as investors wake up to legal and financial risks now that the boom years are over. Sukuks are fixed income products that behave like conventional bonds but don't pay interest - banned by Sharia law - and roughly offer the same protection as an ordinary unsecured corporate bond in case of a default.Source But, the Investor confidence in GCC up post Nakheel sukuk payment: Investor confidence in the Gulf Cooperation Council (GCC) economies took a "significant" drop in December following the Dubai World crisis, but improved post the Nakheel sukuk payment. The monthly GCC Investor Confidence Index dropped 32.7 points to 98.1 points in the wake of Dubai World's announcement on Nov. 25 that it would request a standstill on its $26 billion debt obligations while it restructured various parts of its businesses, including developer Nakheel. Source Thailand: First sukuk bonds planned for Q1: Securities regulators are hopeful that the first Islamic bonds will make their debut in the Thai market in the first quarter of this year. The Securities and Exchange Commission expects to finalise rules for sukuk instruments some time over the next several months. Authorities hope that Islamic bonds will help draw capital from the cash-rich Middle East and other markets. Source Islamic lender Gulf Finance House (GFH) has bought back $9m of its $200m sukuk maturing in 2012, and could buy more. "We see it as an opportunistic buy to support the sukuk holders and support the price," Mohammed Al Muqbel, head of treasury at GFH, told Reuters. GFH said the outstanding amount of the sukuk, or Islamic bond, was now $152.2m Source And CBB Sukuk Al-Salam securities over subscribed: From Ameinfo.com: The Central Bank of Bahrain (CBB) announces that the monthly issue of the Sukuk Al-Salam Islamic securities has been over subscribed. Source