All posts related to KL Conference on Islamic Wealth Management & Financial Planning 2018 - KLC-IWM-2018

Saturday, 31 May 2014

Saudi’s Alhokair plans debut sukuk, loan to fund expansion

Dubai: Saudi Arabian retailer Fawaz Abdul Aziz Alhokair Co plans to issue a debut riyal-denominated sukuk and is close to signing a 1 billion riyal ($266.6 million) loan, it said on Tuesday, to help fund expansion.
Alhokair, the Saudi Arabian retailer which franchises brands such as Zara and Marks and Spencer in the kingdom, will begin meeting local investors on Tuesday ahead of a potential issuing of the Islamic bond, a bourse filing said.
Samba Financial Group’s investment banking arm will arrange the transaction, although no value or tenor of the sukuk was given in the statement.
The company was also close to signing an agreement with a group of banks for a loan worth 1 billion riyals, Alhokair said in a separate stock market statement.
The loan would be used to repay most of its existing loans and also to finance the company’s expansion.
To cover the time between the loan and the sukuk being completed, Alhokair had signed a 315 million riyal bridging loan with Samba, the statement said.
Alhokair operates across 20 markets, predominantly in the Middle East and Commonwealth of Independent States, and has been expanding both on its own and through acquisitions - including the purchase of Spanish clothing brand Blanco earlier this year.
Alhokair was planning to open 404 stores globally in the next financial year, of which half would be in Saudi Arabia, a company official told Reuters in March.
Saudi Arabia’s retail market is highly regarded by investors and companies, given its favourable demographics — about 60 per cent of the population is under 30 — and its growing per capita income.
(Gulf News.Com / 27 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Indonesia prepares Islamic finance road map

Indonesia’s capital market regulator is preparing a five-year road map for Islamic finance to expand the industry in Southeast Asia’s largest economy.
The plan will help boost the number of Islamic capital market products and expand the industry’s investor base, the Financial Services Authority (OJK) said in a statement.
The OJK added that it was seeking market input for the road map and would set up discussion groups with stakeholders, including the central bank, the Finance Ministry, the Indonesian Stock Exchange (IDX) and the country’s national sharia board.
It also said it was refining rules for the issuance of Islamic securities, which it expected to be completed this year. These would include details on the settlement of Islamic financial transactions, disclosure requirements for sukuk (Islamic bonds) and guidelines for sukuk trustees, Bloomberg reported.
Indonesia has 11 Islamic banks and 23 Islamic windows operated by conventional banks. Their combined Islamic banking assets grew 24 percent to Rp 242 trillion (US$20.8 billion) last year, giving the sector a 4.9 percent share of total banking assets, OJK data shows.
Last month, the OJK said it would implement risk management guidelines for Islamic insurance companies and that it was now a full member of the Malaysia-based Islamic Financial Services Board, a major standard-setting body of the industry.
The OJK took over the supervision of banks, brokerages and insurance firms from the central bank and Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) in January this year.
(Jakarta Post / 30 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 29 May 2014

Malaysian Islamic capital market now worth RM1.5 trillion

ICM now accounts for 56% of the overall Malaysian capital market, said the Securities Commission deputy chief executive Datuk Dr Nik Ramlah Mahmood.
“Seventy-one per cent of our public listed companies are designated as syariah-compliant. We also maintained our position as the largest sukuk issuer in the world, accounting for 69% of the global sukuk issuance,” she said at the BNP Paribas -INCEIF Centre for Islamic Wealth Management Symposium here yesterday.
“She said better wealth creation and investment opportunities for investors had also been made available by increasing the number of full-fledged Islamic fund management companies in Malaysia.
“Our Islamic fund management industry with RM97.5bil in assets under management, is managed by 19 asset management companies licensed to exclusively manage syariah-compliant funds.
“Of the total assets under management, RM42bil is in the form of syariah-compliant unit trust funds which grew by 21% in 2013,” said Nik Ramlah.
“Of particular relevance to the Islamic wealth management industry is the fact that Malaysia now has 52 Islamic wholesale funds with almost 15 billion units in circulation with a total net asset value (NAV) of RM16.43bil.
“This represents almost 28% of the NAV of all wholesale funds in Malaysia. While it is clear that the local ICM has supported domestic growth by offering a multitude of financing and investment opportunities to domestic businesses and investors, it also continues to leverage on Malaysia’s core strengths to make very significant strides in the international arena and is now increasingly more integrated with the international market,” she added.
According to Nik Ramlah, a milestone was achieved in this regard with the introduction of the revised screening methodology of listed stocks.
“The two-tier quantitative approach introduced in 2013 further aligns our screening process with international practices, thus paving the way for a greater inflow of foreign Islamic funds into the domestic markets,” she said. — Bernama
“By also incorporating a two-tier quantitative benchmark approach comprising business activity and financial ratio benchmarks, the adoption of the revised methodology is envisaged to further enhance the attractiveness of the Malaysian Islamic equity market and fund management segments to international investors.
“With this in place, the wealth management industry should gain more traction with a wider market, especially from investors looking for syariah-compliant wealth management solutions,” she said.
The symposium, jointly organised with the Labuan International Business and Financial Centre, attracted more than 150 delegates.
A total of six speakers and panelists, ranging from regulators, Islamic scholars, academicians and industry practitioners, convened to share their insights and knowledge of the Islamic wealth management industry.
During the one-day symposium, speakers and delegates deliberated on practical issues and challenges in further developing the Islamic wealth management industry and its relevant management structures such as the Labuan Islamic Trusts and Foundations, to gain a competitive advantage in establishing Malaysia as a preferred Islamic wealth management destination.
At the end of the symposium, Chairman of BNP Paribas - INCEIF Centre for Islamic Wealth Management (CIWM) Advisory Board Professor Datuk Dr Syed Othman Alhabshi, said more awareness programmes need to be created, especially for high net worth individuals and financial wealth managers to promote Islamic wealth management in Malaysia.
Labuan IBFC chief executive officer Saiful Bahari Baharom said Malaysia had the infrastructure and expertise in the Islamic finance space to develop a strong competitive value proposition in syariah-compliant wealth management.
“The Islamic wealth management value chain is long, starting with the acquisition of assets, advisory and management services, in addition to legal, taxation and syariah advice, alongside trust and custodial services. Right at the end is the distribution of the assets.
“Each of these parts contributes to a specific value-added competency that we must strive to enhance to help grow our domestic high-value wealth management industry,” he added.
(The Star Online / 01 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Investment Corporation of Dubai raises $1 billion from sukuk, bond issue

The Dubai Government’s principal investment arm, the Investment Corporation of Dubai, has successfully priced a $1 billion sukuk and bond issue, strengthening the fund’s capacity to invest amid a rising market.

The ICD made the announcement on Tuesday for the dual tranche issue comprising six-year $700 million sukuk and 10-year $300 million conventional bonds. The sukuk profit rate was set at 3.508 per cent per annum while the coupon for the conventional bonds was 4.625 per cent. The dual tranche offering was very well received globally and generated a substantial order book that was more than three times oversubscribed.

The sukuk and bond transactions were issued under ICD’s newly established Trust Certificate Issuance Programme and Euro Medium Term Note Programme, respectively. The newly established programmes are listed on Nasdaq Dubai and the Irish Stock Exchange.

Commenting on the transaction, Mohammed Ibrahim Al Shaibani, Executive Director & CEO of ICD, said: “The positive market environment provided an opportunity for ICD to access the debt capital markets, allowing a diversification of ICD’s sources of funding whilst enhancing its ability to actively invest, both domestically and internationally as growth prospects improve.”
“We are very pleased with the reaction the issuance received from investors. Its success clearly demonstrates both the strength of the ICD portfolio and business model, and the optimism and continued confidence in Dubai,” he added.

The dual tranche offering witnessed over 150 investors participating in the transaction. The sukuk offering saw the strongest demand from the Middle East which accounted for approximately 75 per cent of the sukuks, followed by Europe (17 per cent) and the remainder in Asia. On the other hand, the longer maturity 10 year conventional bond saw more than 30 per cent of the demand come from Europe. Asia and Offshore US investors accounted for seven per cent each, with the remainder placed in the Middle East.

Citigroup, Dubai Islamic Bank PJSC, Emirates NBD Capital, HSBC and Standard Chartered Bank acted as joint lead managers and joint bookrunners of the sukuk, while Citigroup, Emirates NBD Capital, HSBC and Standard Chartered Bank acted as joint lead managers and joint bookrunners of the conventional bonds. The Sukuk Certificate Programme was arranged by Citigroup, Dubai Islamic Bank and Standard Chartered Bank and the Euro Medium Term Note Programme was arranged by Citigroup, Emirates NBD Capital and HSBC.

(Khaleej Times / 28 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Sunday, 25 May 2014

Islamic finance yet to shed sukuk pricing perceptions

DUBAI: Islamic finance has been one of the fastest-growing sectors in global finance but the industry has yet to shake off perceptions about high costs and complexity that are holding back some issuers.
Sukuk, or Islamic bonds, that follow religious principles such as a ban on interest and speculation, are now a major funding tool for companies in the Middle East and southeast Asia, and are becoming increasingly attractive to sovereign issuers.
Britain, Luxembourg, Hong Kong and South Africa all are keen to make maiden sukuk issues, to diversify their funding sources and tap liquidity provided by increasingly wealthy Islamic investors.
Those plans are not new: the Luxembourg government first mooted a sukuk issue in 2010, followed by South Africa in 2011, while Britain has been considering an Islamic bond since 2007.
These and other plans have been delayed by factors including double-taxation on some sukuk structures and a difficulty in identifying assets to underpin the transactions, although Islamic finance experts say such drawbacks have largely been overcome.
Jurisdictions such as Hong Kong and Luxembourg have enacted legislation in the past few years to remove double or even triple tax duties that sukuk can attract due to multiple title transfers required.
Rising demand for sukuk has also depressed costs.
"These recent developments strongly signal growing international acceptance and will facilitate future issuance," said Badlisyah Abdul Ghani, chief executive of CIMB Islamic, one of the industry's top sukuk arrangers.
As a result, first-time issuers that would have expected to pay a premium on their sukuk in previous years can now achieve levels comparable to conventional bonds, he said.
"Issuers that have existing conventional bonds will have a benchmark curve to refer to and the sukuk should be priced flat, if not potentially lower, than the conventional points of reference. They should not pay a premium when raising sukuk."
Issuance of sukuk globally hit an all-time high of $134.3 billion in 2012, but fell to $114.3bn in 2013 as jitters about US monetary policy constrained emerging market assets.
Growth of the market is expected to pick up again this year as the pool of Islamic funds in the Gulf and southeast Asia continues to expand. A Thomson Reuters study predicts sukuk issuance of as much as $130bn in 2014.
Increased clarity on sukuk structures has helped: the design and approval process has become generic as more Sharia advisory firms have entered the market, pushing down costs, said Noel Lourdes, Dublin-based executive director at Amanie Advisors, a Malaysia-based Islamic finance consultancy.
"It is a lot cheaper now. For corporates, it is broadly in line with Eurobond or private dollar-denominated placement transactions," he said.
Still, the British government's plans for a £200 million ($338m) issue are a downsized version of the original, partly to pass the UK Treasury's value-for-money test. And there is still a perception in financial markets that sukuk are generally more expensive or more complex than conventional bonds, or both.
When Hong Kong passed a bill in March to allow its AAA-rated government to issue a sukuk, potentially worth around $500m, local traders said it would have to offer a yield of almost double that on its five-year Hong Kong-dollar bond, which was yielding 1.26 per cent.
Islamic bankers dispute that, saying sukuk is highly sought after and pricing would be comparable with conventional bonds.
"The suggestion (Hong Kong would pay double) is absolutely out of whack. Sukuk pricing, like bond pricing, is a function of credit and the market," said Abdul Ghani, citing the experience of the AAA-rated Islamic Development Bank (IDB).
The Saudi-based IDB has issued sukuk since 2003, pricing them with gradually lower yields, some as low as 12 basis points over Libor for five-year paper, said Abdul Ghani, whose bank helped arrange the latest IDB sukuk in February.
While bankers say a sukuk premium has broadly disappeared for top-rated issuers and Gulf-based companies, some Muslim-majority countries do still face higher issuance costs as investors demand bigger yields due to limited trading activity in secondary markets for sukuk.
In Indonesia, profit rates for government sukuk - the equivalent to a coupon on conventional bonds - are on average 86 basis points higher than comparable conventional government bonds, a March report by the ADB found.
(Gulf Daily News / 25 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic finance has yet to be fully tested, says study

Islamic finance weathered the global financial crisis better than conventional banking, but it was not completely immune and has yet to address potential risks, a report by a standard-setting body for the industry says.
Growing pressure on Islamic banks' profitability, liquidity management, asset quality and capital adequacy were outlined by the Malaysia-based Islamic Financial Services Board (IFSB).
Islamic finance, which has its core markets in the Middle East and Southeast Asia, follows religious principles that ban interest and shun outright speculation.
As such, Islamic bank balance sheets were free from sub-prime loans and structured products that turned sour in 2007, triggering a chain of events that threatened to cause a global financial meltdown.
But the IFSB study, which relied on an analysis of data from 52 full-fledged Islamic banks, found that they were not fully insulated from the crisis.
"Economic slowdown, declining trends of commodity prices, and real estate crises that emanated from the financial crisis also affected Islamic banking performance," the report said.
It estimated net profit margins of Islamic banks had recovered to 1.06 percent by 2012, from a low of 0.87 percent in 2009 but still below 2.9 percent in 2007, before the global crisis.
Asset quality was also in the spotlight: non-performing loans peaked at 6.03 percent in 2010, with banks in the United Arab Emirates, Bahrain and Kuwait some of the worst-affected partly due to greater exposure to real estate.
This meant Islamic banks in those countries fared worse in terms of asset quality than their conventional peers.
Such exposure to real estate remains in the double-digits with no significant changes forecast, although the outlook for the Gulf's real estate sector is now positive, the report said.
Capitalisation levels have been a bright spot for Islamic banks, with levels consistently above those of conventional banks, although there is a catch.
"Islamic banks have generally maintained higher levels of regulatory capital, in part, due to an absence of well-functioning and healthy Islamic interbank money markets," IFSB said.
While liquidity has been a perennial concern, the introduction last year of sharia-compliant money market instruments by the International Islamic Liquidity Management Corp (IILM) has helped close this gap.
The IILM is now regularly issuing short-term Islamic paper since its three-month $490 million debut last August, and it is expected to ramp up issuance, the report said.
A lack of foreign currency deposits is also limiting the industry's ability to expand its customer base, with less than 10 percent of Islamic bank deposits held in foreign currencies across all countries except in Turkey and the UAE.
Sukuk, or Islamic bonds, have been a bright spot for the industry but these are also exposed to risks of withdrawal from conventional investors, the report said.
Investors with no specific sharia-compliant investment mandate could withdraw from sukuk in favour of higher-yielding conventional instruments and further research would be needed to evaluate those risks.
(Arabian Business.Com / 24 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Saturday, 24 May 2014

Insurers agree with SECP to allow takaful windows

DUBAI: Pakistan's insurance firms have resolved a legal dispute with regulators which allows them to offer takaful, or Islamic insurance, a move expected to attract new players and boost competition in the sector.
Pakistan introduced new takaful rules in 2012, allowing the use of takaful windows, which enables insurers to offer sharia-compliant and conventional products side by side, provided client money is segregated.
This prompted a legal challenge by the country's five takaful firms claiming the rules gave conventional insurers an unfair advantage, leaving the industry in limbo.
This has now been cleared up after a mutual agreement was reached this month, Muhammad Kashif Siddiqee, Joint Director at the Securities and Exchange Commission of Pakistan (SECP), told Reuters by telephone.
Under the agreement, insurers will have to allocate 50 million rupees ($506,100) in capital to their window operations, from no capitalisation requirement in the original rules.
The takaful rules will be applicable after a three-month period and the regulator would also amend them to allow takaful firms to co-insure risks alongside conventional players, which the initial rules had forbidden.
Takaful is seen as a bellwether of consumer appetite for Islamic finance products. It is based on the concept of mutuality; the takaful company oversees a pool of funds contributed by all policy holders, but does not necessarily bear risk itself.
Takaful has operated without conventional competitors in Pakistan since the first rules were introduced in 2005, but regulators have been keen to increase insurance penetration.
Takaful's share of the total insurance market is estimated at less than 3 percent and the entry of conventional players would help boost this figure.
The regulator has now received five applications for takaful windows and expects as many as half of all conventional insurers to eventually apply for a licence, said Siddiqee.
The move comes at a time when authorities are stepping up efforts to develop Islamic finance, encouraging the industry to expand its operations in the world's second most populous Muslim nation. 
(Samaa / 23 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic finance yet to be fully tested

Dubai: Islamic finance weathered the global financial crisis better than conventional banking, but it was not completely immune and has yet to address potential risks, a report by a standard-setting body for the industry says.
Growing pressure on Islamic banks’ profitability, liquidity management, asset quality and capital adequacy were outlined by the Malaysia-based Islamic Financial Services Board (IFSB).
Islamic finance, which has its core markets in the Middle East and Southeast Asia, follows religious principles that ban interest and shun outright speculation.
As such, Islamic bank balance sheets were free from sub-prime loans and structured products that turned sour in 2007, triggering a chain of events that threatened to cause a global financial meltdown.
But the IFSB study, which relied on an analysis of data from 52 full-fledged Islamic banks, found that they were not fully insulated from the crisis.
“Economic slowdown, declining trends of commodity prices, and real estate crises that emanated from the financial crisis also affected Islamic banking performance,” the report said.
It estimated net profit margins of Islamic banks had recovered to 1.06 per cent by 2012, from a low of 0.87 per cent in 2009 but still below 2.9 per cent in 2007, before the global crisis.
Asset quality was also in the spotlight: non-performing loans peaked at 6.03 per cent in 2010, with banks in the UAE, Bahrain and Kuwait some of the worst-affected partly due to greater exposure to real estate.
This meant Islamic banks in those countries fared worse in terms of asset quality than their conventional peers.
Such exposure to real estate remains in the double-digits with no significant changes forecast, although the outlook for the Gulf’s real estate sector is now positive, the report said.
Limited fx deposits
Capitalisation levels have been a bright spot for Islamic banks, with levels consistently above those of conventional banks, although there is a catch.
“Islamic banks have generally maintained higher levels of regulatory capital, in part, due to an absence of well-functioning and healthy Islamic interbank money markets,” IFSB said.
While liquidity has been a perennial concern, the introduction last year of Sharia-compliant money market instruments by the International Islamic Liquidity Management Corp (IILM) has helped close this gap.
The IILM is now regularly issuing short-term Islamic paper since its three-month $490 million (Dh1.8 billion) debut last August, and it is expected to ramp up issuance, the report said.
A lack of foreign currency deposits is also limiting the industry’s ability to expand its customer base, with less than 10 per cent of Islamic bank deposits held in foreign currencies across all countries except in Turkey and the UAE.
Sukuk, or Islamic bonds, have been a bright spot for the industry but these are also exposed to risks of withdrawal from conventional investors, the report said.
Investors with no specific Sharia-compliant investment mandate could withdraw from sukuk in favour of higher-yielding conventional instruments and further research would be needed to evaluate those risks.
(Gulfnews.Com / 22 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Friday, 23 May 2014

Malaysia: FGV to issue US$1b sukuk

EXPANSION DRIVE: Conglomerate in midst of choosing banks for the exercise, say sources

PLANTATION giant Felda Global Ventures Holdings Bhd (FGV) is considering selling more than US$1 billion (RM3.21 billion) of dollar-denominated exchangeable Islamic bonds (sukuk), said three people with knowledge of the deal.
    According to them, the bonds will be issued later in the year to finance its expansion drive.
    "FGV is in the midst of choosing banks for the potential offer. It wants to raise cash to buy up more companies to support its existing businesses, albeit cautiously," the sources said.
   Part of the proceeds will be used for potential acquisitions of additional landbank in Southeast Asia and Africa  by 2015 for planting oil palm and rubber.
    FGV raised more than RM11 billion by selling shares on the local stock exchange in 2012. Its initial public offering (IPO) was the second-largest in the world, after Facebook,  that year.
     A portion of the IPO exercise's proceeds was used for capital expenditure to increase efficiency as well as extension of capabilities, plantation acquisitions, expansion of downstream activities and other working capital requirements.
    For fiscal year 2013, FGV's net profit surged 21.72 per cent to RM980.99 million despite the tough economic conditions. Revenue for the full year was RM12.6 billion.
     Its cash and near cash as at end-December stood at RM5.02 billion.
    FGV plans to acquire new businesses and increase plantation acreage and crude palm oil (CPO) production to achieve its revenue target of RM100 billion.
    The company manages 853,000ha of plantations in Malaysia and Indonesia.
    Last year, the company produced 3.21 million tonnes of CPO and it plans to increase production to more than four million tonnes.
    President and chief executive officer Mohd Emir Mavani Abdullah told Business Times recently that FGV aims to manage more than one million hectares of plantations.
    He said to be a RM100 billion turnover company, FGV would need to grow by eight times.

(Business Times / 23 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic finance looks to shake off sukuk pricing hitch

DUBAI, May 22 (Reuters) - Islamic finance has been one of the fastest-growing sectors in global finance but the industry has yet to shake off perceptions about high costs and complexity that are holding back some issuers.
Sukuk, or Islamic bonds that follow religious principles such as a ban on interest and speculation, are now a major funding tool for companies in the Middle East and southeast Asia, and are becoming increasingly attractive to sovereign issuers.
Britain, Luxembourg, Hong Kong and South Africa all are keen to make maiden sukuk issues, to diversify their funding sources and tap liquidity provided by increasingly wealthy Islamic investors.
Those plans are not new: the Luxembourg government first mooted a sukuk issue in 2010, followed by South Africa in 2011, while Britain has been considering an Islamic bond since 2007.
These and other plans have been delayed by factors including double-taxation on some sukuk structures and a difficulty in identifying assets to underpin the transactions, although Islamic finance experts say such drawbacks have largely been overcome.
Jurisdictions such as Hong Kong and Luxembourg have enacted legislation in the past few years to remove double or even triple tax duties that sukuk can attract due to multiple title transfers required. Rising demand for sukuk has also depressed costs.
"These recent developments strongly signal growing international acceptance and will facilitate future issuance," said Badlisyah Abdul Ghani, chief executive of CIMB Islamic , one of the industry's top sukuk arrangers.
As a result, first-time issuers that would have expected to pay a premium on their sukuk in previous years can now achieve levels comparable to conventional bonds, he said.
"Issuers that have existing conventional bonds will have a benchmark curve to refer to and the sukuk should be priced flat, if not potentially lower, than the conventional points of reference. They should not pay a premium when raising sukuk."
Issuance of sukuk globally hit an all-time high of $134.3 billion in 2012, but fell to $114.3 billion in 2013 as jitters about U.S. monetary policy constrained emerging market assets.
Growth of the market is expected to pick up again this year as the pool of Islamic funds in the Gulf and southeast Asia continues to expand. A Thomson Reuters study predicts sukuk issuance of as much as $130 billion in 2014.
Increased clarity on sukuk structures has helped: the design and approval process has become generic as more sharia advisory firms have entered the market, pushing down costs, said Noel Lourdes, Dublin-based executive director at Amanie Advisors, a Malaysia-based Islamic finance consultancy.
"It is a lot cheaper now. For corporates, it is broadly in line with Eurobond or private dollar-denominated placement transactions," he said.
FALLING YIELDS
Still, the British government's plans for a 200 million pound ($338 million) issue are a downsized version of the original, partly to pass the UK Treasury's value-for-money test. And there is still a perception in financial markets that sukuk are generally more expensive or more complex than conventional bonds, or both.
When Hong Kong passed a bill in March to allow its AAA-rated government to issue a sukuk, potentially worth around $500 million, local traders said it would have to offer a yield of almost double that on its five-year Hong Kong-dollar bond, which was yielding 1.26 percent.
Islamic bankers dispute that, saying sukuk is highly sought after and pricing would be comparable with conventional bonds.
"The suggestion (Hong Kong would pay double) is absolutely out of whack. Sukuk pricing, like bond pricing, is a function of credit and the market," said Abdul Ghani at CIMB Islamic, citing the experience of the AAA-rated Islamic Development Bank .
The Saudi-based IDB has issued sukuk since 2003, pricing them with gradually lower yields, some as low as 12 basis points over Libor for five-year paper, said Abdul Ghani, whose bank helped arrange the latest IDB sukuk in February.
Other multilateral bodies that could issue sukuk, such as the Asian Development Bank (ADB) and the African Development Bank (AfDB), should expect pricing similar to their outstanding conventional debt, he said.
AfDB, which issued a three-year conventional bond at mid-swap +1 in March, is still concerned about the cost of a sukuk issue.
"For some years now, we have been in touch with banks to keep abreast of the market. However, so far it has not been cost effective for us as compared to other sources. Thus, we continue monitoring," an AfDB treasury official said.
LACK OF AWARENESS
While bankers say a sukuk premium has broadly disappeared for top-rated issuers and Gulf-based companies, some Muslim-majority countries do still face higher issuance costs as investors demand bigger yields due to limited trading activity in secondary markets for sukuk.
In Indonesia, profit rates for government sukuk - the equivalent to a coupon on conventional bonds - are on average 86 basis points higher than comparable conventional government bonds, a March report by the ADB found.
Other potential issuers also claim costs are high, including the Canadian government which last week ruled out a sukuk.
"A new unconventional product would likely lead to higher issuance costs," a Canadian finance ministry spokesperson told Reuters. "The increased costs would be inconsistent with our objective of raising stable, low cost funding to meet the government's financial needs."
Companies that have not tapped the fixed income market at all or those with sub-investment grade ratings could also have to pay a premium on sukuk, although Amanie's Lourdes said this can be mitigated with shorter tenors or plain vanilla Islamic debt facilities of between $50 million and $100 million.
"A tenor of more than five years is more challenging, especially if it is a first-time credit. We focus on BBB- or above, anything below that is difficult to take to Islamic finance investors unless the name is known," he said.

Many chief financial officers remain sceptical or just unaware of sukuk as an alternative funding option, so some level of education is needed to increase familiarity with sukuk and with the Islamic finance community.
(Reuters / 22 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thursday, 22 May 2014

Malaysia: Religious council introduces online zakat payment system

IPOH: The state Islamic Religious and Malay Customs Council has introduced a system which enables zakat (tithe) payments to be done online.

The system, e-PZB, was launched by state secretary Datuk Seri Abdul Puhat Mat Nayan at Dewan Bankuet of the State Secretariat building here recently.
The council's chief executive officer Dr Amiruddin Muhamed said with the online system, there is no reason for the people to shy away from paying zakat.
"With the system, you just need to register with us and we will take care of the rest," he said.
Amiruddin said with the online system, one could even pay RM10 for zakat.
"The system eliminates red tape."
Amiruddin said the council needed to increase its zakat collection as more poor people in the state are waiting for assistance.
Citing an example, Amiruddin said the council built 300 homes for the poor last year and this year the number would be increased to 400 units.
"The cost to build the homes has also increased from RM35,000 to RM38,000 for two-bedroom units while the cost to build three-bedroom homes had increased to RM44,000 from RM40,000," said Amiruddin.
Besides homes for the poor, Amiruddin said the council also had 51 other assistance.
Those facing problems to sign up with the system can call the council at 05-208 4000.
Puhat said the number of people paying zakat in the state was relatively small. He hoped the number of people paying zakat would increase through this online system.





(New Straits Times / 22 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Mall Built on Saudi Sand Spells Sukuk Success

Dar Al Arkan’s third Islamic bond sale in a year is attracting buyers as investors bet the Saudi Arabian company’s real estate assets outweigh a junk credit rating at Standard & Poor’s.
Dar Al Arkan Real Estate Development Co. (ALARKAN) is poised to sell a benchmark U.S. dollar-denominated sukuk due 2019, according to two people with knowledge of the offering, who asked not to be identified because the information isn’t public. The yield on the company’s May 2018 sukuk slid 107 basis points this year to 6.17 percent at 12:29 p.m. in Riyadh, according to data compiled by Bloomberg. Rates on Middle East Islamic bonds fell 50 basis points in the period to 4.14 percent, JPMorgan Chase & co. indexes show.
Dar Al Arkan, which mostly develops and then sells land so that others can build on it, opened the largest mall in Riyadh in 2012 and is benefiting as the kingdom implements a 2011 plan to spend $130 billion on social causes, including building homes amid a shortage. The developer, rated four levels below investment grade at S&P, owns more than $3.5 billion of property in Saudi Arabia, the majority in Riyadh and Jeddah, according to financial statements.
“They have a huge landbank, even after recently accelerating sales,” Montasser Khelifi, a senior manager for global markets at Dubai-based Quantum Investment Bank Ltd., said by phone yesterday. “That’s a good guarantee in the eyes of sukuk investors.”

Falling Profit

Dar Al Arkan, Saudi Arabia’s second-largest listed real estate developer, issued $300 million of three-year notes in November, and $450 million of five-year debt 12 months ago.
The company repaid a $1 billion sukuk in July 2012, the price for which fell below 70 cents on the dollar in 2009 on concern over its financial position. The developer said in April it’s seeking to diversify income streams and increase recurring revenue. Full-year profit has declined since 2009, according to data compiled by Bloomberg.
“There is starting to be some diversification in the revenue stream,” Khelifi said. “Though in the last few years they have struggled to deliver some of their large scale projects. It shows that maybe they don’t have the firepower to develop the really big projects.”
A spokesman for Dar Al Arkan didn’t immediately respond to a call and an e-mail seeking comment. The yield on the 2018 bond rose four basis points yesterday after the company said it was meeting investors before today’s sale.
The company had about $1.2 billion of debt outstanding yesterday, according to data compiled by Bloomberg. That includes $450 million of sukuk maturing in February. Dar Al Arkan’s cash and cash equivalents more than doubled to 2 billion riyals ($533 million) in the first quarter from a year ago.
“It’s an asset rich company, and even their land value is understated because they use the historical cost price,” Doug Bitcon, a Dubai-based fund manager at Rasmala Investment Bank Ltd., said by phone yesterday. The latest bond issue “positions them well for next year, there are no worries on cash flow,” he said.
(Bloomberg / 21 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Wednesday, 21 May 2014

Islamic finance has 'bright future' in turkey


ISTANBUL — Financial experts and executives of Islamic banks held a meeting in Istanbul to discuss Islamic finance in Turkey and around the world.

"Transforming Islamic Finance in Turkey: Promise of Growth" is the eighth such conference organized by the World Islamic Economic Forum (WIEF) and Independent Industrialists' and Businessmen' Association (MUSIAD). 

It brought together financiers and executives from Muslim-majority countries around the world to share ideas about the opportunities for Islamic finance, and implementation of those opportunities.

Deputy Governor Murat Çetinkaya of the Turkish Central Bank said Islamic finance is on a growth track, both globally and in the Turkish market.

Çetinkaya noted Turkey has huge potential for Islamic financial expansion, although the conventional financial system may pose an obstacle for it.

Humayon Dar, an Islamic economist and president of the London-based EDBIZ Corporation, said Malaysia, Pakistan, Turkey plan to establish a group called the MPT Alliance, which aims to promote Turkey's role in Islamic finance.

Noting that Turkey ranks 12th on the list of world Islamic financial centers, Dar said Iran leads for Islamic finance, followed by Malaysia, Saudi Arabia, Bahrain, Kuwait, United Arab Emirates, Indonesia, Sudan, Pakistan and Qatar.

"By the end of 2020 there will be at least 6 countries in the world with at least 50 percent of market share of Islamic banking and finance," Dar added.



(Daily Sabah / 20 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Tuesday, 20 May 2014

Bahraini bank Al Baraka plans sukuk in South Africa, Pakistan

DUBAI (Reuters) - Bahrain-based Al Baraka Banking Group said it is considering issuing subordinated Islamic bonds through its South African and Pakistani units to boost their regulatory capital.
The Islamic bank's plans come at a time when sovereign sukuk are expected from both countries later this year. [ID:nL5N0JA34X] [ID:nL6N0NK1WR]
The lender has operations in 15 countries across the Middle East, Asia and Africa.
Al Baraka is working with the authorities in South Africa and Pakistan over launching Islamic bonds there, said Chief Executive Adnan Ahmed Yousif.
While details have not been finalised, the prospective deals could mirror the $200 million capital-boosting sukuk issued by Al Baraka's Turkish unit last year, Yousif said. That deal enhanced the bank's Tier 2, or supplementary, capital.
"We will try to do it as a subordinated, to raise capital adequacy ratios," he said.
Islamic banks typically obtain their funding from retail deposits and short-term syndicated Islamic loans, but subordinated deals are increasingly being used as Basel III global banking standards are phased-in across the globe.
In Pakistan, for instance, Islamic banks must maintain a minimum paid-up capital of 6 billion rupees ($60.9 million), a requirement that will be raised to 10 billion rupees by the end of 2016.
Unlike most other Islamic banks, Al Baraka has built the bulk of its business outside the Gulf and southeast Asia. In South Africa, it operates the only full-fledged Islamic bank in the country, with seven retail branches.

Its franchise in Tunisia switched this year from an offshore bank license to a full commercial banking permit, with plans to open 25 branches there in the next three years.($1 = 98.4650 Pakistani rupees)
(Reuters Africa / 19 May 2014)
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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com