The indicated pricing of Bahrain's sovereign sukuk issue, seen as an important gauge for the battered Gulf Arab sukuk market, has come in at the low end of expectations, an expert said on Monday.
Gulf Arab state Bahrain is to issue a benchmark-sized dollar five-year sukuk at initial guidance of a spread of 350 basis points over U.S. Treasuries, an official at one of the lead managers said earlier.
Mohieddine Kronfol, managing director at Dubai-based asset management company Algebra Capital, said the indicated pricing came in at the low end of his expectations.
"It would have been better had they left some juice in there to attract a wider audience," he said.
He said the tight pricing would limit the liquidity of the issue.
The Gulf Arab fixed-income markets lack a strong secondary market, with most sukuk being held until maturity by investors.
"They would better have been more generous to ensure secondary trading and liquidity, for the long-term interest of the region," he said.
He said the issue was unlikely to serve as a benchmark pricing to corporates for longer than a few weeks.
Bahrain is a small oil producer and run a fiscal deficit of 9.8 percent in 2008 as the government struggles to maintain public spending to steer the economy through the downturn.
The global sukuk markets in 2008 slumped some 56 percent from 2007 to $14.9 billion, according to Standard & Poor's.
The Gulf Arab sukuk market has been lying largely idle during the first months of 2009, with corporates looking to sovereign issues to help them gauge investors' appetite.
Kronfol said the issue would be a success regardless the pricing, as Islamic banks in the region have enough liquidity to absorb it.
Calyon, Deutsche and HSBC are lead managers of the sukuk issue.
Bahrain's central bank has said the country plans a $500 mln issue.