Middle East and Asian investors are showing significant interest in Malaysia's first proposed sukuk sale in eight years, but turbulent markets may prevent an immediate launch, two sources with direct knowledge of the deal said on Wednesday.

Malaysia, targeting to raise around $1 billion (RM3.3 billion) via an ijara sukuk offering, is ending its weeklong series of investor presentations in New York later on Wednesday.

Ijara sukuk are rental bonds backed by tangible assets such as property. Returns come in the shape of rental streams paid on the asset.

The underlying asset in the planned issue would be government hospitals.

The investor meetings, which kicked off in Hong Kong last Thursday moved to Jeddah on Saturday, Riyadh on Sunday and London and Dubai on Monday.

"At this point (the issuer) might wait as the markets are a bit unsettled and... they want to go from a position of strength," the source said.

In the Middle East, the issuer met a wide range of investors including the National Bank of Abu Dhabi, the source said.

Another source said the government would decide within the next few days on when to launch the sale.

"The markets are choppy. The government doesn't need the cash and it wants a proper benchmark," the source said.

"The roadshow is ending in New York today and the government will decide over the next few days on when to press the button."

Despite strong demand and the scarcity of Malaysian sovereign paper in international markets, it is unlikely the offering would exceed $1 billion.

Malaysia last tapped the global bond market in 2002 when it raised $600 million through the sale of its first international sukuk.

CIMB, HSBC and Barclays are managing the deal for the government.

The sukuk market had shown early signs of recovery after being hit by Dubai's debt restructuring and several high-profile defaults.

But the recovery is now in doubt on worries that Europe's fiscal woes could undermine global economic growth.

Earlier this month, Saudi Electricity Co sold 7 billion riyals worth of 7-year sukuk at 95 basis points above Saudi Interbank Offered Rate (Sibor).

The yield on the issue was below the 160 bps above Sibor at which the Gulf's largest power utility priced its previous

sukuk issue of the same size.

- Reuters