Investor demand for a measure of sukuk performance has been growing as interest in Sharia-compliant investment instruments increases globally.
"The issue with sukuks has always been that they do not have a secondary market, there's no trading, and you can't really have an index unless you have a secondary market," said Alka Banerjee, vice president of Global Equities within S&P's Index Services group.
"Maybe by next year we'll be in a place to have a sukuk index."
Banerjee said S&P had received requests for a Sharia-compliant debt index product, but did not elaborate.
Christopher O'Brien, vice president for global business development at S&P said in April the ratings agency had been approached by southeast Asian and Middle Eastern institutions.
Sukuk issuance received a double blow last year from the global liquidity freeze and a debate on the compliance of some of its structures with Islamic law, with issuance slumping more than 50 percent to $14.9 billion, according to S&P.
"We know the sukuk market took a big hit during this crisis, and some sukuks have defaulted, which should not have happened, considering the way they are structured," Banerjee said.
A Reuters poll conducted in October said global sukuk issuance may exceed $20 billion in 2010. n increase in issues in the Gulf Arab region as well as investor appetite for Sharia-compliant debt is already becoming more apparent.
The government of Dubai last week placed nearly $2 billion in new five-year sukuk issues, a move which helped boost confidence in the emirate.
A $1 billion sukuk issue by Abu Dhabi's Tourism, Development and Investment Co in October generated orders worth $6.5 billion and also started trading in the secondary market, highlighting demand.
"We're in a wait and watch mode," Banerjee said.
Sharia indices made up 3 percent of S&P's index portfolio data business at the end of 2008.
Link: http://business.maktoob.com/20090000391006/S_P_may_consider_starting_sukuk_index_in_10/Article.htm
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