London, Sept 19 (ZEENEWS.COM) The Islamic bond market is burgeoning, with much of the investment coming from non-Muslim overseas investors, according to a study by a London-based law firm published yesterday.

During the first half of 2006, the value of issued Islamic bonds, or Sukuk, more than doubled to 4.585 billion dollars, according to Trowers and Hamlins, whose offices abroad are based mainly in the gulf region.

Its report showed also that these represented 81 per cent of all new bonds issued in the gulf during the first half compared with 26 percent during the first six months of 2005.

Trowers and Hamlins said that the principal driver behind the surge in issuance of Islamic bonds is the proliferation of gulf-based Islamic investment funds, which are creating demand for investments which comply with Islamic law.

"There has been a huge inflow of oil wealth into Islamic investment funds which are, naturally enough, seeking Islamically-compliant vehicles, such as Sukuks, in which to channel funds," said Neale Downes, a partner at Trowers and Hamlins.

"Foreign investors represent an increasingly dominant segment of the market for Islamically-compliant debt. What is really significant is that they are now comfortable buying corporate Sukuk and not just those issued by sovereign borrowers," he added.

Unlike a conventional corporate bond, a Sukuk is asset-backed. Investors own a portion of the assets financed, rather than the cash the assets produce.