Islamic bonds widen appeal

Demand for Islamic bonds is extending beyond the original customer base, with growing issuance and strong secondary trading among non-Muslims.

An Islamic bond issued last week by Aldar Properties, a Dubai-based real estate company, has secured more than 70% non-Muslim allocation, the highest allocation so far from non-Muslims investors. Aldar had requested a wider international take-up to broaden its investor base.

Aldar issued the bond with a maturity of four years and nine months, and attracted interest from 200 investors from Europe, the Middle East and Asia. The amount issued was increased to $2.53 billion from $2.2 billion, due to strong demand and half the issuance went to accounts in the UK.

Douglas Decker, London-based head of convertible origination at Barclays Capital, which underwrote the deal, said the secondary market in sukuk had also been growing significantly. He said: “We’ve been trading over $1 billion in the PCFC and Nakheel bonds [the two largest issues of Islamic bonds] and approximately $500 million in the Aldar. They are all traded pretty actively at a 25-point bid-offer spread in the secondary market.”