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Wednesday, 6 February 2008

Malaysia's CIMB Islamic to arrange $3-4 bln Islamic bonds

KUALA LUMPUR, Feb 5 (Reuters) - Malaysia's second-largest lender CIMB said on Tuesday it expected to arrange as much as $4 billion in Islamic bonds in 2008, as the appetite for such issues remains high.
The amount of Islamic bonds, or sukuk, to be issued this year is likely to match 2007's $30 billion, said Badlisyah Abdul Ghani, head of Islamic banking for CIMB bank, one of the biggest deal-makers in sukuk.
"The appetite is still very high. The reason for that is there is still a very shallow supply of investible instruments in the Islamic market," he told the Reuters Islamic Finance summit.
"I don't foresee us doing another $7 billion of deals in total this year like we did in 2007. This year we will probably be doing about $3 or $4 billion."
Last year, CIMB accounted for nearly half of the local Islamic bond market and a fifth of global sukuk issues.
"I don't foresee us maintaining such huge market share. On average we have been able to maintain 25 percent local market share, and that market share would continue to be reduced as the market becomes bigger," Badlisyah said. He said Malaysia would continue to account for about 60 percent of global sukuk issuance.
A Deutsche Bank executive told Reuters on Monday that it was helping U.S. and Canadian firms to sell Islamic bonds in Malaysia this year worth $300-500 million in ringgit.
"Considering the Malaysian Islamic bond market is the most developed and most active in the world, and there is the ability of getting better pricing for the issuance in Malaysia, definitely the Americans or Japanese or Koreans would want to tap the Malaysian market," Badlisyah said.
Non-traditional players, facing credit tightening from their usual sources of borrowing, are reported to be looking to tap into demand from the world's 1.3 billion Muslims who are keen for sharia-compliant financial assets.
Badlisyah said borrowers who had scrapped sales of Islamic bonds last year because of the credit crunch triggered by U.S. mortgage defaults were likely to return to the market this year.
"Everybody still has their financial requirements ... Most of these corporates will definitely be coming back into the market this year," he added.
Sukuks are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest, which is banned as usury under Islamic law.
(Reporting by Syed Azman, editing by Will Waterman)

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