There was a oddly sombre mood at the Kuala Lumpur Islamic Finance Forum last week odd because 2011s event had been so upbeat and because the industry is enjoying such a successful 2012.
It may be that the approaching Malaysian elections have encouraged more introspection. Perhaps there was a bigger share of local attendees to the conference than last year. Or perhaps it was just because bankers were thinking about all the paperwork they still had to do ahead of fourth quarter reporting.
Whatever the reason, there was an eerie hush on day one of this years event a sharp contrast to 2011s rambunctious crowd. The difference was not lost on those chairing the discussions. Richard Thomas, CEO of Gatehouse, a London-based Islamic bank, kicked off the second morning by asking speakers to talk about what had made them happiest over the last year.
They have plenty to choose from. Islamic finance in 2012 has witnessed a litany of game-changers particularly in the international primary market. Turkey finally cast aside its secular misgivings and issued a benchmark-setting debut $1.5bn sukuk, while Qatars $4bn Islamic debut drew an unprecedented $26bn global book.
Malaysia, for its part, began the year with a record breaking MR19.6bn ($6.18bn) public sukuk from Plus Expressways, while the recent $1.5bn multi-currency sukuk programme from mobile phone company Axiata Group opened the door wide to Chinese investment in Malaysia with its inclusion of a well received Rmb1bn ($157.8m) debut dim sum note.
The Gulf has bounced back from the financial crisis, with Dubais storming market return via a $1.25bn sukuk that included five and 10-year tranches. Saudi Electricity Co also managed to push out investor trust to 10 years with its $1.75bn sukuk, which drew over $18bn of orders. Meanwhile, Islamic Development Bank issued $800bn of sukuk (its biggest deal since the crisis) at the tightest ever spreads of just 40bp over mid-swaps converging on the levels of its better-known conventional development bank peers.
The sector is rapidly broadening, too, with new entrants lining up to join the ranks of international sukuk issuers. Post-revolutionary Egypt is closing in on laws that will allow it to issue a deal, while South Africa continues to work meticulously towards its own debut. Kazakhstan has gone further, issuing a MR240m ($76m) sovereign proxy bond into Malaysia through its Development Bank.
All of this has been accompanied by frenzied activity behind the scenes, with the industry making huge progress in areas such as regulation, tax law, indexing, Shariah standards, microfinance initiatives and human capital. It's still too soon to say that 2012 will pass without a single blip Dana Gas has a difficult looming sukuk maturity next week. But even a disastrous result there would be only a small cloud in an otherwise blue sky. Momentum is a precious commodity in the current market environment, and Islamic finance seems to have it in spades. In the interests of building a sound pipeline for 2013, it needs to get a little less bashful and a little more celebratory.