Global Halal Investing and Sukuks - Inherently Safer?

Quite an interesting article on global sukuk dynamics from the Emirates' Business 24/7 today. It suggests that global investors - Muslims and non-Muslims - are increasingly turning to sukuk bonds as hedges against excess risk in global markets, particularly the US. Are properly structured, well-managed sukuks inherently a better option than western-style government or company debt instruments? Are they somehow safer? My gut reaction is a big, "It depends". At bottom, it depends most on the financial fundamentals of the entity issuing the contract. If the fundamentals aren't there ( or are not transparent and accountable), it doesn't much matter what legal enforcement code is. The Gulf financial markets are of course on an up-swing right now, and up-swings tend to obfuscate all manner evils and irrationality.

The test of a lot of these assumptions about the safety of Islamic banking instruments will come in the next down cycle in the Gulf (although competing financial centers in Malaysia, London and elsewhere may make this picture less clear). For now, Gulf and global investors seem happy to continue to move from US markets into global halal investments. While the latter shows tremendous upside (especially in the short run), abandoning bargain opportunities in the US markets is likely a mistake.