The UAE remained the second largest issuer of Islamic bonds (sukuk) in the world last year despite a sharp decline in their value compared with 2007, according to a leading Gulf investment company.

Malaysia, which has dominated the sukuk market over the past decade, was again the largest issuer, with a value of $5.5 billion, (Dh20.2bn) the Kuwaiti-based Global Investment House (GIH) said.

The UAE maintained the second position, with a total sukuk issue value of nearly $5.3 billion, the report said.

As for sukuk issued worldwide, the study said their total value tumbled by more than 50 per cent in 2008 because of a sharp decline in the last quarter, mainly in the Gulf, due to the global financial turmoil.

"The total value of sukuk issued worldwide plunged by nearly half to $15.1bn last year from around $33.1bn in 2007," the study said. "The main decline was in corporate sukuk, which dropped in number to 92 from 97. But sovereign sukuk surged to 73 from 32 in the same period." A breakdown showed the value of sukuk issued in the UAE dropped to about $5.3bn from $6.59bn. There was also a decline in the other GCC states, except Qatar.

"In 2008, the GCC countries accounted for around 55 per cent of the total value of sukuk issued worldwide, while Malaysia accounted for 36 per cent."

In a recent study, Saudi Arabia's largest bank said the value of corporate sukuk issued in the GCC fell by 57 per cent in 2008.

The sukuk issuance in the GCC and other global markets last year was in sharp contrast to 2007, when such investment activity rose to one of its highest levels, the National Commercial Bank said.

"Last year was bleak in terms of value and number of issuances," NCB said.