HSBC Holding expects to arrange the sale of as much as $3 billion in Islamic bonds in the Middle East in the third quarter, the bank's head of Islamic finance in Saudi Arabia said.

The sukuk, or bonds, would be sold for petroleum companies and utility firms such as Saudi Electricity Company, which said last week it would sell bonds to raise at least 2 billion riyals ($533.3 million) in 2007.

'We are expecting two to three transactions of international benchmark sizes,' said Hissam Kamal Hassan. 'Issuers are both state-sponsored companies and private issuers.'

The market for sukuk, which are structured as profit-sharing or rental agreements and do not pay interest, has grown as Middle Eastern and foreign companies look to attract Muslim investors.

Deutsche Bank said earlier this month global sales of sukuk may more than double this year to $50 billion from $20 billion in 2006 as companies seek to diversify their sources of funding. Reuters