Going Back to the Scene of the Crime: Low Sukuk “Yields” in Malaysia Prompting Investors to Return to Dubai

Yields on Malaysia’s sovereign Islamic bonds are trading at the narrowest premium to Treasuries since they were sold, giving investors incentives to buy higher- returning sukuk after Dubai World’s debt restructuring agreement.

It seems Islamic bond investors have short memories…Dubai World was the perpetrator of the world’s largest Sukuk swindle less than 2 years ago…



Dubai Sukuk ‘Massive’ Rally Ruled Out by Citi

Dubai’s Islamic bonds, after beating sukuk from Malaysia this quarter, may face limited gains because the restructuring of Dubai World’s $24.9 billion in debt requires asset sales over eight years.


Malaysia Seeks to Become Shariah Finance Hub

Malaysia, the world’s largest market for sukuk, plans to improve its legal system to become an alternative location to the U.K. for resolving international Islamic finance disputes.

The goal is to position Malaysian “laws as the law of choice for Islamic finance transactions globally,” the central bank said in a statement Aug. 30. Disputes about compliance with Shariah principles are a risk to the industry’s expansion, it said. Persian Gulf companies have traditionally based cross- border contracts on U.K. law to take advantage of the country’s developed legal system and neutrality, according to Unicorn Investment Bank BSC in Bahrain.

We see a conflict brewing here. Either Malaysian law will become more and more Shariah compliant or else the Shariah scholars will come down on Malaysia…