A general view of the Grand Hamad street that hosts banks and financial institutions in Doha . Economic growth in the Gulf will help the long-term outlook for Islamic bond sales, Fitch Ratings said last month. Bloomberg /Dubai Arabian Gulf Islamic bonds are resisting an emerging market sell-off after Shariah-compliant debt sales in the region had their slowest start to a year since 2011. The average yield on Middle East sukuk fell six basis points last month to 4.6% January 31 , according to JPMorgan Chase & Co indexes. That compares with a 16 basis-point increase to 5.4% for emerging-market bond yields, according to Bloomberg indexes. Bonds in developing countries are tumbling as the US reduces stimulus measures and after manufacturing data from China cast doubt on the global economic recovery. Investors pulled a combined $12.3bn from equity and bond funds during the week ending Jan 29 , according to EPFR Global. "These concerns don't really impact GCC economies because the currencies are pegged to the dollar and the countries have current accounts in the black," Yaser Abushaban , the executive director for asset management at Dubai -based Emirates Investment Bank PJSC , said by phone on Sunday. "They can weather the storm easily. Meanwhile the lack of new supply has created support for existing securities." No dollar-denominated Shariah-compliant bonds were sold in the six Gulf Co-operation Council countries in January. Only Saudi Electricity Co and the Government of Qatar have issued long-term local-currency sukuk this year, according to data compiled by Bloomberg . "Abundant liquidity coupled with limited issuance lends important support to the price performance," Ali Soner Guney , fixed-income fund manager at National Bank of Abu Dhabi , said by phone on Sunday. The region also has solid economic fundamentals, he said. Economic growth in the oil-rich GCC will help the long-term outlook for Islamic bond sales, Fitch Ratings said last month. Any increase in issuance from the region or a recovery in emerging markets that attracts funds away from the GCC, could have a "marginal" negative impact on sukuk, Abushaban said. Developing markets were in turmoil last week after data showed Chinese manufacturing growth slowing. Argentina's peso started sliding as the central bank pared dollar sales to preserve international reserves. Efforts by Turkey and South Africa to shore up their currencies by raising interest rates failed and the US Federal Reserve said it would reduce its monthly bond purchases to $65mn from $75mn . Emerging market bonds have lost 1.1% since January 23 , the day HSBC Holdings and Markit Economics forecast a slowdown in China manufacturing growth, according to data compiled by Bloomberg . Meanwhile, sukuk from the GCC fell 0.3%. "We don't see much risk of contagion and so far we haven't seen it taking place," Guney said. "Problems surrounding individual emerging markets look rather isolated and country specific."
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