Sukuk market to hit $100 bln in 2008: E&Y

By Daisy Ku

LONDON (Reuters) - The issuance of global Islamic bonds, or sukuk, is likely to double to $100 billion this year, thanks to higher take-up of Sharia-compliant financial products among Middle East investors, said Ernst & Young.

The sum of Islamic assets has been growing at over 20 percent a year and reached $900 billion in 2007, the firm said, and is set to hit $2 trillion by 2010.

Excess wealth has been created by the oil boom, and a growing proportion of that wealth has been allocated to financial products that comply with sharia, the Islamic legal code that prohibits interest payment, speculation and investments in sectors such as alcohol or gambling.

"We estimate that by 2009, $1.5 trillion of the world's high net worth individual wealth to come from the Middle East. And 70 percent of this wealth could invest in Islamic financial products," Ernst & Young Managing Partner Noor ur Rahman Abid told Reuters in an interview.

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The global sukuk market, which set off in 2002, reached a record market value of $51.5 billion in 2007, up 90 percent from $27.2 billion in 2006, according to the Islamic Finance Information Service (IFIS).

An estimated $10 billion of Islamic deals has been delayed by the dislocation in credit markets sparked by the U.S. subprime mortgage crisis, including Qatar Steel Company's $1.3 billion refinancing deal, the $2.5 billion fund-raising plan of Dubai Electricity & Water Authority (Dewa) and Emirates Aluminium's $2 billion bond sale.

But $10 billion worth of sukuk, mostly from property firms and financial institutions in the Gulf region, have been announced, said Abid.  Continued...