Deutsche eyes Asia sukuk deals, Brunei included

DEUTSCHE Bank is in talks to arrange sukuk issues in Brunei, Malaysia, Indonesia and Pakistan as improving credit conditions bring issuers back to the market, a senior official said yesterday.

Global sukuk issuance would probably rise 20-30 per cent this year, helped by demand for Islamic assets, the lender said.

Many issuers were likely to launch in the first half in anticipation of rising interest rates, it also said.

"There seems to be a lot of demand for Islamic assets from countries like Malaysia," Jamzidi Khalid, chief executive of Deutsche Bank AG International Islamic Banking, said in a telephone interview.

"But if you look at our neighbouring countries, Brunei for instance, and even Indonesia, we have been discussing with some larger corporates and sovereigns about doing a dollar sukuk or a local sukuk issuance."

The US$107 billion sukuk market, the most popular form of Islamic financing, is trying to regain investor confidence hit by restructuring of the world's largest sukuk and uncertainty about how legal systems will handle syariah bond defaults.

Global sukuk sales totalled US$23.3 billion last year, up from US$14.9 billion in 2008 but off the record US$34.3 billion logged in 2007, according to Standard & Poor's.

Jamzidi said Deutsche did not arrange any sukuk deals in Asia last year but Malaysia, Brunei, Indonesia and Pakistan were its priority Islamic banking markets in the region.

"Korea is definitely looking to allow its issuers to tap into the sukuk market and that's a developing story from our perspective," he said.

"China has a very large Muslim population and that could be a topic of discussion at some point, maybe not this year but going forward definitely."

Deutsche Bank ranked 19th in the Thomson Reuters Islamic bond managers 2009 league table, with US$247.5 million of deals. It was behind banks such as CIMB, HSBC, Citi and Morgan Stanley but ahead of lenders like Calyon, Goldman Sachs and Kuwait Finance House.

Deutsche said this month it had received an international Islamic banking licence from Malaysia's central bank.

Jamzidi said sukuk pricing had gone "a bit wayward as opposed to conventional funding levels" since Dubai's debt restructuring.

"But by and large, people are coming to their senses about where a particular entity would fund out there and regardless of whether it's a conventional or sukuk, we think that the differentiation between the two would be very minimal."

Reuters