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ASIA WATCH June 2010 |
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Malaysia Returns
This issuance will be the country’s second dollar-denominated Sukuk since Malaysia’s world first global sovereign offering back in 2002. Hospitals have once again provided the underlying assets for the five-year Ijarah-based sovereign Sukuk. Whilst the timing and tenor of the issuance has come under scrutiny, it is expected to easily surpass the US$600 million raised in the previous offering. This is primarily due to the rarity of such offerings in the market and its 144A status. This strength is backed by preliminary investment grade ratings of A- by Standard & Poor’s and A3 from Moody’s Investors Service. Barclays Capital, CIMB Bank, and HSBC have been mandated as the joint bookrunners and joint-lead managers. For an in depth analysis of this issuance see article Testing Tepid Water. Widening the field MALAYSIA: Bursa Malaysia plans to widen the range of commodities used on Bursa Suq Al-Sila’ over the next few months to a year in a move designed to lure Islamic banks from the Middle East. Bursa Malaysia CEO Yusli Mohamed Yusoff said crude palm oil is being currently used, but there are plans to consider metals or other commodities as well. According to him, the exchange was working with commodity suppliers in the region with the necessary volume and accessibility for such an undertaking. Staying safe INDONESIA: The country has trimmed the size of its planned sales of Islamic and yen-denominated debt due to its concern that Greece’s debt crisis will spread in Europe, according to an Indonesian finance ministry official. The head of debt management, Rahmat Waluyanto, said the bonds will be sold at benchmark size but did not reveal the exact details. Indonesia has been selling bonds in the domestic and international markets to help raise funds to plug a budget deficit estimated to reach 2.1% of gross domestic product this year. Non-Gulf scope MALAYSIA: Currently has all the right infrastructures in place to become an Islamic finance hub, but has yet to reach its full potential, said PricewaterhouseCoopers global Islamic finance leader Mohammad Faiz Azmi. Pointing out that potential international investors using Islamic finance do not necessarily come from the Middle East only but also from other countries as well, Azmi noted that while Malaysia already has a strong domestic market, it could do more to attract foreign funds. Food for thought MALAYSIA: Singapore-based food manufacturer and distributor Etika International Holdings has signed a RM368 million (US$115 million) syndicated financing facility based on the Bai al Inah concept with a consortium of three banks. Etika chairman Jaya J B Tan said of the amount, RM159 million (US$50 million) will be working capital. The balance will refinance existing bank borrowings in Malaysia and fund future capital expansion as well as merger and acquisition plans. Shariah banks see growth INDONESIA: The Islamic banking sector in the country is on a growth trajectory. Data from Bank Indonesia show that assets of Shariah banks rose from IDR1.79 trillion (US$197 million) in 2000 to IDR66.089 trillion (US$7.28 billion) at the end of 2009, an average growth of 53% a year over the past eight years. The bank is optimistic that the industry will grow more impressively in the future as a result of the country’s favorable regulatory conditions. Popular destination MALAYSIA: More of the country’s Shariah funds are expected to make inroads into overseas markets, especially Asia, in view of the improving economy and investors diversifying their portfolios for better returns. Pacific Mutual Fund CEO and chief investment officer Michael Auyeung said it was inevitable for these funds to invest abroad, as more investors are keen to reduce risk concentration in the local market. In the first quarter of this year, nine Shariah compliant funds (seven foreign and two domestic) had been launched in various markets, notably in the Asia-Pacific region. Sukuk plan
Its director for governance, finance and trade division in the Southeast Asia department, Jaseem Ahmed, said: “In Asia, we need at least US$300 billion of investments every year in infrastructure, water, roads and communications.” Ahmed did not provide any details on the Sukuk issuance. Ambitious plans HONG KONG: Hong Kong Monetary Authority executive director (monetary management) Edmond Lau said the government is committed to developing Islamic finance. In his keynote address at the recent Hong Kong Islamic Finance news Roadshow, Lau stated that Hong Kong’s small Muslim population will not be a deterrent to the government’s plans to develop Islamic finance further. Sukuk slowdown? MALAYSIA: RAM Holdings expects corporate bond sales (including Sukuk) to fall this year due to the current lack of infrastructure projects in the country. According to its subsidiary RAM Rating Services, infrastructure lending accounts for some 20 to 30% of private debt issuances. According to its annual report, RAM Ratings expects about RM55 billion (US$16.7 billion) to RM60 billion (US$18.3 billion) of gross corporate bonds and Sukuk to be issued this year. Better times ahead UAE: The country’s eight biggest banks may report an average 18% rise in profit this year after enduring one of their worst phases due to the global economic crisis and regional debt default problems, said Global Investment House. Capital approved
The funds, structured as a Tier-2 Wakalah agreement, follow the ministry’s AED70billion (US$19 billion) stability program put in place back in October 2008. DIB did not provide further details on the terms of the Wakalah agreement, apart from saying that the ministry could convert the money into equity (under some circumstances), giving it a shareholding stake in the bank. Enhanced procedures UAE: The Emirates Securities and Commodities Authority and the Dubai Department of Economic Development have signed a MoU to strengthen licensing procedures for joint stock and securities companies. Under the agreement, the two parties will be linked electronically to issue and renew trade licenses for public joint stock and securities companies. This will ease the exchange of information and data related to Dubai’s annual general meetings, providing data related to the procedures of issuing shares, Sukuk and debt bonds. Bearing fruit UAE: A total of 14 local banks have set aside 60% less provisions in the first quarter of this year to AED2.76 billion (US$751 million) compared to the same period last year, according to a study by Al Fajer Securities analyst Maha Kanez. He attributed this to the positive outcome following the central bank’s decision not to ask banks to make provisions for the facilities given to Dubai World, which include loans and facilities offered to Nakheel. Punishment meted UAE: NASDAQ Dubai has suspended several Sukuk and other securities for not disclosing their 2009 financial statements and annual reports to the exchange. The list includes IIG Funding Sukuk, Nakheel Development 2 (Sukuk), Nakheel Development 3 (Sukuk), TID Global Sukuk I, and Dubai Holding Commercial Operations MTN. Value consideration UAE: Dubai Group may not be keen to sell its 30.5% stake in Bank Islam Malaysia because it sees value in the bank, according to a report. Dubai Group had initially hired investment bank Rothschild to find potential buyers. The sale was to help the Middle Eastern investor shift its focus closer to home and settle its debt burden. Both Dubai Group and Bank Islam were not immediately available for comment. Bank purchase BAHRAIN: Al Baraka Banking Group expects to buy a stake in Bank Muamalat Malaysia by the end of this year. President and CEO Adnan Ahmed Yousif said it planned to grow its assets to about US$21 billion from US$14 billion currently over the next three years. Yousif said the group also plans to spend between US$30 million and US$50 million buying a bank in Indonesia and opening a representative office in Libya this year. Solid feat YEMEN: The total funding of Islamic and commercial banks reached YER444 billion (US$2.17 billion) in the first quarter of this year, according to a report by the Central Bank of Yemen. Deposits of these banks reached YER423 billion (US$2.07 billion) during the same period, while their foreign assets increased by 47% to YER2.2 billion (US$10.8 million). Law on debt UAE: Government officials expect their public debt law to be introduced this year. It will also open the way for the establishment of a debt management unit by the ministry of finance to closely regulate government debt and oversee all sovereign securities including bond and Sukuk issuances. Concerns emerged about the levels of government debt after a rise in Dubai’s debt burden as the emirate attempted to reverse a slowdown in its property and financial services sectors after the global financial crisis. No need for extra cash LEBANON: The country does not plan to issue a sovereign Islamic bond as its banking system is flush with cash, said a central bank official. First vice-governor Raed Charafeddine said the central bank has mopped up liquidity and added that additional liquidity would only place upward pressure on prices. Prior to this, there had been speculation that Lebanon was considering issuing a Sukuk after it passed a law governing Islamic banks in 2004. Market retreat Singapore: DBS Group’s Islamic banking unit, Islamic Bank of Asia (IBA) Singapore’s only wholly-owned fully licensed Islamic bank, is set to reduce its workforce — transferring 10 of 65 staff to new roles within DBS and IBA — in yet another indication that Islamic finance is struggling to gain a foothold in the city state. After posting a US$77.1million loss last year, unconfirmed reports suggested that DBS is seeking to pull out of the lending business entirely despite statements to the contrary — “we remain committed to growing our Islamic banking franchise in this region,” said a spokesperson. Singapore has actively promoted itself as an Islamic finance hub in order to cement its status as a regional banking hub, enabling it to tap into the cash-rich GCC market. However,Singapore offers no domestic retail market and only sporadic, low denomination Sukuk issuances. Change of mind BAHRAIN: Gulf Finance House (GFH) is considering increasing its 37% stake in Khaleeji Commercial Bank (KHCB) instead of selling it under its asset sales program, according to GFH CEO Ted Pretty. Pretty attributed this change of heart to the fact that the shareholding in KHCB was increasingly attractive to GFH due to its plans to enter the more stable retail business. Like other Bahraini investment houses, GFH has been badly hit by the regional real estate crunch. In February, Pretty said GFH was in talks to sell its stakes in KHCB, First Energy Bank, Qatar’s QInvest and Asia Finance House. KHCB recently unveiled its new corporate identity with the introduction of a new logo. Strategic Sukuk QATAR: Qatar Islamic Bank (QIB) plans to sell US$750 million of Sukuk in the second half of this year, according to CEO Salah Jaidah. The Sukuk will be the first Islamic debt offering from the bank. He said QIB will sell the Sukuk to position itself in the Sukuk market, instead of using it to meet its liquidity needs. Positive settlement KUWAIT: The five-year Ijarah-based US$100 million Commercial Real Estate Sukuk (Kuwait) has been settled. According to the arrangers’ spokeman, the Sukuk settlement news will reflect positively on the Sukuk market and its recent gain in momentum. The Ijarah Sukuk which matures this year is the first Sukuk Going Islamic IRAQ: Ashur International Bank for Investment wants to establish Islamic banking services in the country, said chairman Wadee N Al-Handel. He said the bank is waiting for approval from the Central Bank of Iraq to offer Islamic banking services. |
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MALAYSIA: In the wake of European sovereign debt woes Prime Minister Najib Razak has launched a benchmark dollar-denominated global Sukuk under the government’s Special Purpose Vehicle 1Malaysia Sukuk Global. 
PHILIPPINES: The Asian Development Bank (ADB) plans to issue an Islamic Medium Term Notes program worth several billion dollars to finance future infrastructure project in Asia. 
UAE: Dubai Islamic Bank’s (DIB) shareholders have approved a pre-arranged AED3.75 billion (US$1billion) capital injection from the ministry of finance. The move is part of the government’s efforts to boost the banking system.