Bonds and Shariah-compliant debt in the six-nation Gulf Cooperation Council have made 12 percent this year, bringing their total returns since 2009 to more than 34 percent, according to HSBC/Nasdaq Dubai's GCC U.S. Dollar Sukuk/Bond Index. Gains may drop to between 4 percent and 6 percent next year, Abdul Kadir Hussain, who manages about $270 million as chief executive officer of Mashreq Capital DIFC Ltd., said in an interview in Dubai yesterday.

"Three years is a long time to have a rally," said Hussain, whose Mashreq Al-Islami Income Fund (BADISIN) handed investors 13 percent this year and non Shariah-compliant fund 18 percent. "The last time valuations were this stretched was probably in 2006 or 2007, but it was a much smaller market."

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