Dark Towers Bring Forth Crisis

As we prepare to move to a new decade, a quick look back to another turning point, 1999, saw the creation of the “Skyscraper Index” by Andrew Lawrence, research director at Dresdner Kleinwort. Since Mr. Lawrence developed it, he can call it whatever he likes but from what I’ve read, it seems more like an indicator than an index.

Here’s why: the theory behind the index is that the desire to build the world’s tallest building is usually a precursor to an economic downturn in the place where the building is located.

Examples include: the Singer and Metropolitan Life buildings before the Panic of 1907, the Chrysler and Empire State Building and the Great Depression, the World Trade Center and Sears Tower before the stagflation of the 1970s and the Petronas Tower in Kuala Lumpur before the East Asian Crisis.

Further proof of the index’s effectiveness is the Burj, currently the world’s tallest building located in that creator of palm tree shaped islands, Dubai. Construction was completed in 2007.

With all of the fantasy surrounding some of Dubai’s development projects it should not come as a surprise that Francis Matthew, the editor-at-large for the “Gulf News”, the largest English-language daily in the U.A.E., has created a “style guide” for his reporters instructing them to avoid the words “bailout”, “default” and “debt-crisis” while encouraging the use of “financial consolidation” and “fiscal support”. When asked about the new rules, Mr. Matthews said, “We’re trying to restrict people from using financially incorrect terms.”

Given that logic, the whole issue with Dubai World’s debt could probably have been avoided if they would have described the Burj as “least vertically challenged” instead of the world’s tallest building thus avoiding the scenario described by Andy Lawrence.

It should also be noted that the next “world’s tallest building” is being built in Shanghai and is scheduled for completion in 2012. It will be called Shanghai World. Given what just occurred on the banks of the Persian Gulf, if they can’t stop construction maybe they can at least change the name.

Not showing any signs of impending doom, the National Bureau of Statistics in Beijing announced last Friday that the Middle Kingdom’s GDP for 2008 was 31.405TN Yuan ($4.6TN), about 4.5% higher than the previous estimate of 30.067TN Yuan putting YoY growth at 9.6% vs. the 9.0% original estimate.
These numbers also appear to be “cleaner” than earlier thought with regard to the nation’s carbon footprint as the same agency said that energy use was 5.2% less per unit of GDP than previously reported.
Services also seemed to gain as a proportion of total GDP with the revised number equal to 41.8% vs. the 40.1% originally reported. This is still a bit away from the 70% of GDP that services comprise in many Western economies.

With that type of growth, it could be possible for China to surpass Japan as the world’s number two economy as early as 2011.
Speaking of “11”, Li Yizhong, China’s Minister of Industry and Information Technology, said that the target rate of growth for industrial production is 11% for next year which should allow China to maintain the nation’s growth at 8%. Some experts believe 9% growth in 2010 is well within the realm of possibility.

Jim Delaney

KL Stocks - Apex & Salcon

China at Copenhagen - 恶人先告状

Getting Ready For 2010

KL Stock - Keladi

KCPO:- Watch Out for the Bear - 28/12/09

Last week I was uncomfortable with the up moves as it was not accompanied by the indicators at the same time and I advised of taking profit if prices go 5 points below the previous day low.

The indicators have now turned ugly as the MACD continues its descent while the Stochastic has crossed down again and it is going towards its 50's signal line. The ADX which is above both the D+ and D- has now started to fall. This is usually a signal telling us the prior trend has ceased, at least for the moment now. You should also start to take note that the MACD has formed a bearish divergence. This is telling us the big boys in this market have been faking their bullishness, they may be just luring more fools in so that they can sell off their positions at a higher premium. But since the MACD is still relatively "high" above its zero line, I would suggest you keep an eye on this one as they may put in a few more attempts on the same tricks by pushing prices higher. Until MACD forms a higher peak then its last peak, thus erasing this divergence, then you may go back and rest easy.

If you had shorted the market when it broke below  the upper Bollinger Band, then place a stop at 2530.

 

The weekly chart remains bullish as prices maintain above the upper Bolliner Band and the MACD is still rising. The Stochastic has now entered into its "overbought" zone. But since the ADX has been rising and now has crossed up a falling D- which is usually a more bullish buy signal. So I would emphasize more on the MACD .

So again as like the previous week, the weekly chart remains bullish while the daily chart has shown signs of weaknesses. So like as in the case when we are unsure of the market - either we stay out or we trade small. But I would be more cautious now as the USD has been strengthening which is usually unkind to most commodities.

FKLI - This Market May Be Getting Ready For a Big One- 28/12/09

The daily ADX continues to descend lower and now it is at a miserable 14's. Though last week triggered another new short signal, but price has not gone down. But neither it was  stopped out.

An usually more reliable signal to handle such difficult market situation would be to watch out the D-. It would need to expand outward to go above its prior peak (as marked out) in order to get a confirmation for another sell signal. On  the other hand if the D+ is to expand outward and go above the prior peak of the D-, then it would be taken as a new buy signal. But you should take note the MACD has already crossed down its zero signal line, so a bearish inclined mentality would be more prudent.

The weekly chart is getting increasing bearish as prices are unable to climb back up above the upper Bollinger Band while the negative MACD continues its descent. The Stochastic has crossed down its 80's signal line which offers an initial sell signal.

Overall this market's readings are continued to deteriorate as its daily and weekly indicators are negative. But since we are now at the end of the year and with holidays abound, the market has not taken any directional moves yet. So I would think  you should also leave this market for the time being and come back after the new year . But having said that, it does not mean you should ignore this market completely,  with the extremely lowly ADX and the multiple time period bearish divergences, I would say an excitable and profitable time would  arrive soon.

If you are still in the earlier short positions, keep 1269 as stop.

KCPO - Be ready to take profit - 21/12/09

This market staged another up move by breaking above the upper Bollinger Band . Take note  that though the Stochastic has only confirmed the buy on the next day, but so far the MACD has not offer a similar confirmation. But at least we have the ADX rising again.

It is now within striking distance of our next target of 2650. So I would NOT be engaging a large position at around here. Place stop at 2560 or 5 ticks below last day's low to protect your profit.

The weekly chart is still as bullish as ever. Prices remain above the upper Bollinger Band and both the MACD and the  Stochastic remain positive and continue to rise. Maybe you would have to watch out would be the Stochastic has now gone into the overbought zone. The weekly ADX has also been rising which may cross up the falling D- soon. I usually take this type of crossing up as a more bullish signal than other types of cross ups.

Summary:- the weekly chart is getting even more bullish than ever, but the daily chart does NOT look so as it is already near its next target. So I would get ready to take whatever profit on the table and wait for the next signal which may offer more assurances for the bull to continue onwards.

FKLI - Watch out for new sell signal again 21/12/09

The flat ADX and the oversold Stochastic last week kept the market inside the range as marked out by 2 horizontal lines. Now we are having another classic confirmation of a range bound situation as the MACD has started falling again while the Stochastic is rising. As the MACD is now almost fallen to its zero signal line, I think you should maintain a bearish stance on this market.

Last week our stop was hit , so the earlier shorts were closed. Some of us may had engaged some new long positions as prices closed above the lower Bollinger Band which I usually take as an initial trading signal. And these long positions would had been stopped out when prices went below the lower Bollinger Band on Thursday. This kind of frustrating trades usually happen when the ADX is flat or low.

I would re-engage some new shorts position at 1258 as when price goes below the lower Bollinger Band again next. Of course I would prefer to see the Stochastic to fall again to confirm the new weakness. Another confirming signal I would be watching will be the D- should break above its previous peak as marked out a horizontal line at the chart. With that, we could be having the first signal that a trend is back in the market. Place stops at 1267.



The weekly chart is getting more bearish as price is unable to climb back above the upper Bollinger Band. Both the MACD and Stochastic are continuing to fall. The Stochastic may cross down its own 80's signal line which I would call it as an initial sell signal.

The US Dollar has made its bullish comeback as I had been forewarning for the past few weeks. A strong USD is usually bad news for stock markets. And you should not forget the existence of the multiple bearish divergences found in this chart, so you should watch out for any new sell signal that may come out from this market.

KL Stocks - D&O and Fitters

KCPO - Let's Wait For More Signs 14/12/09

My last week's "overbought" observation seems to be a fair opinion as this market started to retrace. It closed below the upper Bollinger Band and took out our stop in the process. I would take the closing below the upper Bollinger Band as an initial sell signal. The Stochastic has also crossed down its 80's signal line which is complimenting my sell decision. The MACD has also crossed down. But as it is still relatively "high" from its zero signal line, I would continue to monitor its descent for a more reliable signal. The ADX has turned flat and since it is now at above both the D+ and D-, I would call that as an end of the prior trend.

Again the weekly chart does not support any selling. Both the Stochastic and the MACD remain positive and rising. Prices manage to stay above the upper Bollinger Band. The ADX is still maintaining its upward movement, all of which are telling us the bull is still in control.

So since the weekly chart does not support the daily bear yet, I would want to wait for more sign before deciding the next cause of action. Meanwhile I would be a little bit cautious. Place your stop at 2550.

FKLI - Waiting For a Big Bash Down ? 14/12/09

  With the ADX has been lying flat at 18's which is telling us there is no trend in the market, prices generally remain within the range  within 2 horizontal lines as marked out last week.  We would have to pay more attention to the Stochastic which is now got a bit oversold. There is some possibility that we will get some minor rebound on the strength of the overnight DJIA . On the other hand you should pay attention to the MACD which has now almost fallen through its zero signal line.  I usually take that as a more bearish sign. So I would place my stop at 1258 just in case the market reverses but add on more shorts at 1250.

 

The weekly chart has deteriorated as price has closed below the upper Bollinger Band for the first time since  the bull commenced  its current run on April.  Both the MACD and the Stochastic  are negative and falling. Another early sell signal would be when the Stochastic crosses down its 80's signal line. The weekly ADX is also flat as its daily's which is not confirming any strong trend.

So now we may have the weekly chart backing the already bearish daily chart, you should tune your mental state from a bull to a bear. As I have been forewarning on the return of the USD's bull which has already  been confirmed last Friday , you should start to be cautious on stocks side.

BRIC ? How About The PIGS ?

Portugal, Italy, Greece and Spain (PIGS): Cracks in the European Union
Cracks in the European Union are getting alarmingly obvious.

First, the news:

LONDON (MarketWatch) -- Greece on Tuesday [Dec. 8] became the first country in the 16-nation euro zone to see its debt rating cut to below single-A ... sending Greek shares and government bonds sharply lower...

And here's an excerpt from a study titled "Cracks in the EU" published four days ago, on December 4, in the new issue of our monthly Global Market Perspective:

The recent earthshaking announcement from Dubai World indicates that the U.S. is not alone in dealing with an overleveraged economy. In fact, many countries are in more dire straits than the U.S. As with real earthquakes, the financial aftershocks of Dubai World’s semi-default will be felt far and wide, particularly farther to the north in Europe.

Some of the weakest European countries have their own acronym, which runs counter to the positive overtone of the BRIC economies (Brazil, Russia, India and China). They are collectively called the PIGS (Portugal, Italy, Greece and Spain). Each of these economies has problems, but none more so than Greece. It has the least-loved bond market in the EU, as evidenced by its having to offer the highest interest rates. It also has the lowest bond rating in the union and the highest debt-to-GDP ratio at over 91%.

Many of Greece’s problems stem from problem banks. Greek banks poured money into the capital-starved Balkans to take advantage of the higher earnings potential. However, now that the Balkan economies have stopped growing, the potential for losses is staggering: Banks have extended loans to the region equal to 20% of Greece’s GDP. So, in 2008, Greece followed virtually every other nation as it bailed out its banks that weren’t smart enough to see a recession coming.

The Greek bank bailout cost 28 billion euros, which is equal to 10% of Greece’s GDP. Was it enough to prevent further bank problems? The President of the National Bank of Greece thinks so, as he recently stated that the naysayers are wrong and that the “rumors [of default] are exaggerated.” It reminds us of Bear Stearns CEO’s comment, “There is absolutely no truth to the rumors of liquidity problems,’’ six days before Bear Stearns was acquired before it had to declare bankruptcy.

Further problems are on the horizon for Greece with its budget deficit projected at 12.7% of GDP this year (4 times the EU limit). Greek businesses are hurting from a stronger euro, which has crimped tourism. Construction and shipping, of which Greece claims 20% of the world’s fleet, have also been slow due to the global recession. Add to these problems the fact that Greece needs $75 billion this year to meet expenses and for debt repayments. This leaves higher taxes and loans from the IMF or EU as the only likely stopgaps.

Both the stock and bond markets in Greece suggest economic weakness is dead ahead. The Greek stock market has rallied in corrective three waves with two equal legs up from its March low. And it’s already fallen 25% from its October 15th high. Investors in the Greek bond market demand almost 2% more from Greece than they do from Germany on a 10-year bond; investors see a fracture in the EU. The EU has stated that it won’t let Greece default, but it’s clear that investors have concerns.

U.S. investors should remember that Greece is simply one nation of many that are likely to produce further shocks to the global economy. Therefore, capital safety still seems to be the best option for most investors, while speculators may want to focus on the PIGS, and Greece specifically, for downside opportunities.
 
By Vadim Pokhlebkin

KL Stock - Gadang

KL Stock -Choobee

China, stop bitching !

By Michael Pettis

Mainland China's foreign reserves surged to a record US$2.13 trillion at the end June2009, confirming concerns that speculative capital is flooding into the nation to bet on rising asset prices and a quick economic recovery. Reserves rose US$178 billion in the second quarter, the biggest quarterly increase on record and up from the US$1.95 trillion yuan at the end of March. Most of the increase was driven by the very large trade surplus and smaller but still high net FDI inflows, plus of course returns on the existing portfolio. However, there is the unexplained portion of the increase in reserves, which serves as a proxy for hot money, has turned from negative in the first quarter to very positive in the second.

Hot money is pro-cyclical, and its effect will be to intensify growth in the short term, even as it increases volatility and makes monetary policy more difficult. China's central bank must recycle the net surplus on the current account and the capital account, and with the very high current account surplus, China would be creating a huge amount of domestic money just from that source. The fact that it is also running a large capital account surplus makes the central bank's monetary management that much more difficult. As long as this fiscal-stimulus-induced boom continues, hot money inflows will heat things up even more.

Does the fact that China has huge reserves mean that they will be buying loads of US Treasuries? Is China still funding the US deficit? Most people will not be differentiating between the US fiscal deficit and the US current account deficit. China is mainly funding ONE of them, not both of them altogether. When we take things and argue, we must be clear on the details because we end up revealing how shallow and little we know of the subject matter.

Goldman Sachs Group Inc. estimates that US government borrowing may total US$3.25 trillion in the year ending Sept. 30, almost four times the US$892 billion in 2008, to finance the budget deficit. Here is an example of warped thinking and a poor grasp of economics : “China’s reserves will allow the U.S. to run a higher fiscal deficit than other nations,” said Bilal Hafeez, the London-based global head of currency strategy at Deutsche Bank AG.

That is incorrect and flawed. The fact that China’s reserves have surged will in no way make it easier for the US to fund its fiscal deficit even though China has no choice but to invest these additional reserves in US Treasury bonds. Besides valuation changes and interest income, there are two reasons for the increase in the reserves – the very high trade surplus and net capital inflows into China. Take the second reason first. If money flows into China for investment purposes, it must flow out of somewhere else, and that somewhere else for the most part means the global pool of dollar savings which would anyway have been available to fund the US fiscal deficit directly or indirectly. China is acting like a unique bank that takes risk-seeking money and funnels it into low-risk assets. The USA profits from this intermediation while China runs a significant negative carry.

What about the dollars generated from the trade surplus and invested into US Treasury bonds? Won’t that help the US fund its fiscal deficit? Again the answer is no. The US government is not borrowing for abstract reasons, but rather is borrowing in order to spend locally to generate domestic employment. The amount of borrowing it needs to generate a fixed amount of domestic jobs is correlated with the US trade deficit, because it is through the trade deficit that domestic consumption “leaks out” to create jobs abroad. The higher the trade deficit, in other words, the more the US government needs to borrow to generate a fixed number of American jobs, and so the fact that China is reinvesting the dollars generated by the trade surplus with the US does not make it easier for the US to borrow since it simultaneously requires the US to borrow more. China does not fund the US fiscal deficit. It funds the US current account deficit, and it has no choice but to fund it. If the US wants China to buy US$1 trillion of new bonds every year all it has to do is ensure that the US runs a US$1 trillion trade deficit with China every year.

China may continue to bitch and scream about the Fed's printing press and the plethora of US Treasuries, but they will have to continue to buy and fund the US because the flip side of the coin does no one any good.

Will the USD Bull Kicks "Experts" In The Teeth ?

I have been a USD bull since early September which firmly places me among the world's smallest minority of market players. I must say it is sometime not very pleasant as some would ridicule me for my views. This is especially so when gold has been rallying in such a dynamic fashion. But I  stick to my chart readings and kept my faiths.

The day when the Dubai World broke its default news, I had my "Spiderman sense" tingling that USD may be finally coming back. As the USD is always considered as a risk currency. Friday it tried for another upside break which went to test its prior fractal high. The next few days would be extremely interesting to watch. The 'experts' put the Friday's upside action on the US bullish employment figure. But I personally would think it could be more to do with a possible meltdown at the North Korea due to its government's daylight robbery of its people'. It could trigger a rebellion which would be a havoc for the South and China. (refugees, civil war, lawlessness etc) 

Of course those are the "fundamentals" side of the story, technically the USD Index daily chart is getting more interesting as the earlier mentioned (1)testing its prior fractal high of 75.88. If we can see a daily closing of above this level, then I would think the bull is back in business. As at now, (2) it is already closed above the upper Bollinger Band. The Stochastic is rising. (3) Crossing the 50's signal line would be another bullish confirmation. The MACD has also turned positive and rising. I would (4) like to see it crossing up above its zero line for a more reliable confirmation of the bull. (5) Another bullish item would be the D+ which has now crossed above the D-. If we can see a higher high on the coming days, it would meet Wilder's extreme rule for a buy. In both the Stochastic and the MACD, a bullish divergence has already formed and maybe acting it out its effect now.

The only " missing link" is the flat ADX which is also 'died' on 12's. This is telling a trend is not confirmed. I would like to see (6) a rising ADX crossing up the falling D- for a confirmation of a new trend. You should watch this one closely.

 
 
The weekly chart MACD has finally turned positive. But it remains 'far' from its zero signal line thus it would be a less reliable buy signal. And take note that it does not register any bullish divergence. The Stochastic has just crossed up its 20 signal line which may be taken as an initial buy signal. And it comes with a bullish divergence. With this in place, I would think the new up move should has much meat to chew on.

Price has also closed up above the lower Bollinger Band for the first time since May this year. This can be taken as another initial buy signal. An item that I would very much to see turning positive is the DMI, but at this moment, the D- is still above the D+ which should be read as bearish. But the ADX is now located above both the D+ and D- and has turned flat since mid October. I would read this as an overbought situation and the prior bear has now lost its momentum.

I am getting ever increasing bullish on the USD bull and I think this bull run would kick many 'experts' in the teeth.

KCPO - Stay with the bull, for the time being -7/12/09

This market did not go any place until on Friday when it gained 84 points. There is nothing much to say about this except maybe the ADX has risen to 37 which is sometime considered by technicians as overbought. But as I have always say here - market may be 'overbought' but they can remain so for days/weeks to come.

If it had not able to break above 2521 ,this market would have been doing a  potentially double tops (26/11 and 13/8/2009) . But since it has successfully closed above that level, its next resistance will be at 2650 and 2799.

The weekly chart is nothing but bullish. The MACD and the Stochastic both continue to rise. Prices stay above the upper Bollinger Band. And most encouraging item would be the rising ADX which is telling us a trend is in place.

So stay with the bull as long as  prices stay above the upper Bollinger Band. Place your stop at  2490.

FKLI - A storm brewing ? - 7/12/09

Though we have most of the sell signals activated last week, I noticed the ADX was falling so I was thinking that we should  not engage in more selling positions yet. And as expected in a falling ADX situation, the market did not continue its prior trend of falling but instead it just holds on.

Now we have the Stochastic turning positive while the MACD continues its fall. This is again a classical sign of a sideway market where 2 indicators contradict each other. Since the stop of 1278 was not triggered last week, so we remain in the short positions. This week I would again place my stop at 1278 . I have drawn 2 horizontal lines marking out its recent range, any breakup or breakdown would be meaningful.

Please pay attention that the and the ADX has already fallen below 20's and Bollinger Band has started to squeeze, both are warning us that a major violent move should come forth soon. Since there is the multi periodical bearish divergences at the MACD, so the more logical opinion  would be to pay more attention to the sell side.


Again the weekly chart is not supporting the sell side story at the daily chart yet. Price is still able to hold above the upper Bollinger Band and D+ stays above the D-. Though the MACD has turned negative but it is still relatively "high" above its zero line, thus rendering it as an unreliable sell signal. The Stochastic is also able to hold above the 80's signal line which is not offering  a sell signal. Since the ADX has already turned flat , all I can say is the bull is currently taking a rest.

Summary - since the weekly chart is NOT supporting the daily chart's bears, so I would not engage too big a position, yet. But you should stay alert as the Band squeeze and low ADX may be just be the beginning of a new phase.

And I am getting more convinced that the USD will have a merry Christmas which if so, will surely bring tears to the equities market.

I think the US Property Market has fully recovered

In Malaysia when we buy certain property, the developer may give you free this and free that (usually furniture/kitchen equipment etc) to sweeten the deal. No sir, not in America. There they only give  away a can of pork and bean. Indirectly confirming how strong is their property market now. "You want to buy, buy lah. Otherwise there will be others who are hard up on our can of bean ! And it is for  a limited time only"

Will Islamic Financing able to stand up to Test?

Dubai Crisis Tests Laws of Islamic Financing

By HEATHER TIMMONS

NEW DELHI — The debt crisis in Dubai is about to test one of the fastest-growing areas in banking, Islamic finance, and put the city-state’s opaque judicial system on trial, according to bankers and experts in finance.

The Dubai International Financial Center. Financiers were surprised when the emirate moved to freeze some debt payments.

Many loans and bonds that comply with Shariah, or Islamic law, were issued in recent years by Dubai World, the investment arm of Dubai, and other Persian Gulf companies as oil-rich Middle East nations increased spending, and the global credit crisis fed debt investments in emerging markets.

But, because there have been few major defaults in this market, there is little precedent for arbitrating the unique terms of these instruments.

That is likely to create many legal issues for investors in Dubai World, which sent jitters through global markets by seeking to delay payments on $59 billion in debt. Abdulrahman al-Saleh, director general of Dubai’s finance department, said Monday that Dubai World was not guaranteed by the government, and the creditors would need to “bear some of the responsibility” for the company’s debt.

Shariah-compliant investments prohibit lenders from earning interest, and effectively place lenders and borrowers into a form of partnership. Yet there are no consistent rules about who gets repaid first if a company defaults on such debt, said Zaher Barakat, a professor of Islamic finance at Cass Business School in London.
The first test of what that means for investors may happen around Dec. 14, when payments on a $3.5 billion Shariah-compliant bond owed by Dubai World’s real estate subsidiary, Nakheel, come due. If Nakheel defaults on its payment, legal proceedings may be initiated.
It is unclear what may happen next. Nakheel bondholders have formed a creditors’ group representing more than 25 percent of the outstanding debt, a legal adviser to the group said Monday.
Holders of these bonds “are going to argue that they are in the secured position on the underlying asset,” said one bank investor involved in the issuance of some of Dubai’s Shariah-compliant debt. That means that bondholders could insist on being repaid before banks, upending the traditional bankruptcy hierarchy.
“No one has tested the legal system or the documentation,” a lawyer briefed on the situation said.

The 237-page prospectus for the Nakheel bond provides little clarity. In the case of a bankruptcy by Dubai World or Nakheel, bondholders have no guarantee of “repayment of their claims in full or at all,” it said. Under Dubai law, it added, no debt owed by the ruler or government can be recovered by taking possession of the government’s assets. 

A default would also pose a major new test for Dubai’s courts, which have never handled a major bankruptcy of one of the government’s own companies, lawyers and bankers said.
Unlike its neighbors, Dubai has kept its judiciary system separate from the United Arab Emirates Federal Judiciary Authority. The decisions of the Dubai courts, which are controlled by the emirate’s ruling family, can be fickle, say lawyers in the region.
For example, in order to bring a court case against a government-owned or government-run entity, a corporation or individual needs to get permission — from the government. In the prospectus for Nakheel bonds, investors are warned that “judicial precedents in Dubai have no binding effect on subsequent decisions,” and that court decisions in Dubai are “generally not recorded.” 

Global issuance of Shariah-compliant bonds and loans grew 40 percent in the first 10 months of 2009 from a year ago, Moody’s Investors Services said in a November note to clients. The total amount of Shariah-compliant debt outstanding is estimated at about $1 trillion, up from $700 billion just two years ago. About 10 percent of Dubai’s $80 billion debt load complies with Shariah, bankers and analysts estimate.

Malaysia was traditionally the hub of Islamic finance, but much of this new activity has been centered around Dubai, and foreign and local law firms and banks there helped the emirate raise much of its debt. Dubai even has a school that turns students into “certified Islamic finance executives,” whose stamp of approval is required for an instrument to be deemed Shariah-compliant.

The surge in Islamic finance has led to hiring sprees at banks, and given rise to a series of new financial indicators like the Dow Jones Islamic Market index. Hoping to appeal to the Middle East’s huge sovereign wealth funds, even non-Islamic institutions have started to raise money using Islamic finance.

In October, the British Treasury drew up rules that would soon allow Britain to issue Shariah-compliant government debt. The same month, the World Bank issued $100 million in Shariah-compliant bonds.