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ASIA WATCH  July/August 2010 |
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Increasing contributor
Standard Chartered Saadiq’s total banking assets as at the 31st December 2009 stood at RM4.8 billion (US$1.5 billion). Innovative products PAKISTAN: It is better to innovate Islamic financial products than replicate conventional banking products to provide for Islamic finance’s increasing global demand, according to Islamic finance scholar Dr Zamir Iqbal. Iqbal said that close to no effort was made to develop such products and the current Islamic banking business model needs further review if it is to cater to the rapid growth in demand for more sophisticated products. He also added that there is a greater need to develop mechanisms for enhancing liquidity and generating innovation. Competitive edge INDONESIA: The country may provide tax incentives for Sukuk issuances and Islamic bank deposits to better compete with Malaysia. According to Mulya E Siregar, Islamic banking director at Bank Indonesia, the tax incentives being considered will help boost banking capital, while the other can provide a tax holiday for Sukuk issues. Indonesia’s Islamic bank assets stood at IDR66 trillion (US$7.2 billion) as of December 2009 while Malaysia’s Islamic banking assets totaled US$95 billion for the same period. Principal owner THAILAND: The Islamic Bank of Thailand will become the major shareholder of Nava Leasing with a 49% stake, said the firm’s managing director Nantaphol Pongspaibool. According to Pongspaibool, Nava Leasing will maintain its focus on the leasing business in spite of the takeover, and will open more branches in the south to accommodate Muslim clients. Offers refused INDIA: The Kerala state government has refused bids by Reliance Capital, Doha Bank and members of royal families from West Asia to buy into a non-banking financial company (NBFC) based on Shariah principles. The state government is reported to not want any one individual or company owning more than 20% of the NBFC’s equity. Reliance Capital had offered to invest up to 74% of the paid-up capital while Doha Bank had offered to buy 40%, according to minister for industries Elamaram Kareem. Real estate listing SINGAPORE: Investment firm Emirates Tarian is planning to list an Islamic real estate investment trust — Sabana REIT — that will have assets worth SG$500 million (US$355.4 million). The Shariah REIT will be managed by United Overseas Bank and HSBC, with the initial public offering scheduled for late 2010 or early 2011. Bids turned down INDONESIA: The finance ministry has rejected all incoming bids worth a total of IDR1.2 trillion (US$129.6 million) at its five year based Sukuk auctions, as debt woes in Europe prompted investors to demand higher yields. According to the ministry, investors asked for profit rates of 8.81% to 9.5%, well above the 8.5% profit rate offered on comparable conventional government bonds. The ministry, which aimed to raise IDR1 trillion (US$110 million) from the auctions to help fund the state budget deficit, did not cite its reasons for rejecting the bids. Bidding war
Khazanah Nasional may sell as much as SG$500 million (US$345 million) of Sukuk if its SG$1.18 billion (US$835 million) takeover bid is succesful. Situation report UAE: The Dubai government will meet with European investors to update them on current economic developments in the country. International collaboration MALAYSIA: Local financial institutions have been urged to seek international cooperation to boost their Islamic wealth management services. According to second finance minister Ahmad Husni Mohamad Hanadzlah, Malaysia did not have the crucial branding to promote its products and services internationally despite having the technical expertise in Shariah compliant investment. Keeping watch BANGLADESH: The Central Bank of Bangladesh has introduced a guideline and monitoring system to supervise its Islamic banking operations. The plan is part of a five year strategic plan aimed at reforming the country’s financial sector. Going the Shariah route MALAYSIA: Shariah advisory and infrastructure system provider Cydinar has tabled plans to set up an Islamic gold exchange traded fund for the country on Bursa Malaysia. Mohd Zahari Osman, CEO at Cydinar, stated that an Islamic Gold ETF would help investors avoid the risk of buying physical gold. Better coordination UAE: Islamic banks in the country are facing challenges from Shariah board rulings seeking better coordination among Islamic banks, according to Sultan bin Nasser al-Suwaidi, governor of the central bank. Islamic banks also face the challenge of short-term liquidity management, said Nasser al-Suwaidi. The governor said that the UAE economy is forecasted to grow at an expected rate of 4% in 2010 and 2011. Cultivating minds
To resolve the problem, Agustianto has called upon Bank Indonesia to push the government, especially the department of education, to endorse the Islamic finance curriculum. IAEI had previously submitted a 2005 blueprint to the government, in which it underlined a need to have an Islamic finance curriculum in higher learning institutions, to develop the Islamic finance industry. Industry booster BRUNEI: The Brunei government is planning to build its halal sector via Islamic finance by raising capital through the issuance of Sukuk. Rushdi Siddiqui, Thomson Reuters global head of Islamic finance and OIC countries, said that increased investment in the form of Sukuk will develop more Shariah based companies as opposed to Shariah compliant companies. He said the investments would create the necessary environment to Double roles MALAYSIA: AmIslamic Bank signed an MoU with state education loan provider Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) to become the financier and facility agent for a 10-year RM1.5 billion (US$451 million) Bai al Inah term financing. The proceeds of the facility will be utilized to provide Shariah compliant education financing for PTPTN. CIMB Standard rebranded to CapAsia MALAYSIA: CIMB Standard is a joint venture private equity fund manager between Malaysia based CIMB Group and South Africa based Standard Bank Group. Payback time BAHRAIN: Gulf Finance House (GFH) aims to reach an agreement with creditors by early July on the renegotiated terms of a US$100 million Wakalah financing facility. Like other Bahraini investment houses, GFH has been hard hit by the end of the regional property boom that swept away the sector’s business model of arranging property projects and private equity deals. It has already staved off default on a US$300 million loan that was due to mature in February 2010. It is now planning to sell down assets to improve its funding position. Out of the dark UAE: Dubai may issue a dollar denominated Islamic bond, which is estimated to have a seven to 10-year maturity period. According to a report, Dubai plans to issue this in the third quarter of 2010. Dubai previously issued a five year dollar and dirham denominated two tranche Sukuk in October 2009, shortly before state owned conglomerate Dubai World shocked markets with a request to defer billions in debt payments. The global Islamic bond market was recently strengthened after Dubai World announced its latest plans to restructure. Going international
Hammour said the bonds will also help widen Jordan’s liquidity and allow its banks to finance more projects. At present, the country relies on foreign investment and grants to finance deficits in the budget. Without grants, the deficit is predicted to reach JOD1 billion (US$1.4 billion) in 2010. QIB invests in Sukuk QATAR: Qatar Islamic Bank has invested QAR1.25 billion (US$343 million) in an Islamic bond issued by the Qatar Central Bank on behalf of the government. The Sukuk is based on the Ijarah based contract. Qatar issued QAR10 billion (US$2.75 billion) worth of eight-year Islamic bonds with a coupon of 6.5% to local banks in June in an effort to develop the domestic bond market and provide a new vehicle to pool the excess liquidity in the country’s banking sector. IDB to launch housing fund SAUDI ARABIA: The Islamic Development Bank plans to set up a US$500 million fund to provide financing for developers of affordable housing in its 56 member countries. Al Aboodi added that the fund would be established by the end of the year at the latest. License to operate MALAYSIA: Saturna, the subsidiary of US based investment management firm Saturna Capital Corporation, has been granted an Islamic fund management license by the Securities Commission Malaysia. Nick Kaiser, chairman at Saturna Capital, said Malaysia was chosen for its business friendly environment and status as an Islamic financial hub. Sands of opportunity SAUDI ARABIA: Standard Chartered Bank plans to enter the country by the end of this year to boost its Islamic banking revenue. According to the bank’s CEO V Shankar, Saudi Arabia has the biggest Islamic banking market in the Middle East. Standard Chartered Bank expects its total revenue from the Middle East to double within the next five years to US$4 billion annually. The bank wants to grow its Middle East share of business to 20% in five years. Behind the veil KUWAIT: The Investment Dar (TID) may be prevented from using Shariah laws as a defense in a lawsuit filed by Lebanon based Blom Bank over a disputed investment. This was after TID’s Shariah board said the deal was a valid Islamic contract. The board also told the firm to avoid using Islamic laws as a defense in any future litigation without discussing the matter with them first. Blom Bank sued TID in a British court last year to recover US$10.7 million that it invested in the company in 2007, as well as a 5% return promised in the terms of the Islamic contract. The firm, however, refused to pay, arguing that the deal was not Shariah compliant. Alternative routes
Nasser Saidi, chief economist at Dubai International Financial Centre Authority, said that the markets can be put in place quickly as they are useful for short-term financing. Saving its skin BAHRAIN: Cash strapped Gulf Finance House (GFH) has sold a 50% stake in Bahrain Financial Harbour Holding to Emar Bahrain for US$262 million. According to reports, this was an asset swap with a cash component of only US$40 million. GFH is divesting its non-core assets to raise funds in order to repay a US$300 million loan. Back in the market JORDAN: The Jordan Dubai Islamic Bank made its market debut on the Amman Stock Exchange. The May 2010 debut comes nearly 18 months after Dubai Islamic Bank purchased a 52% stake in the Industrial Development Bank of Jordan and renamed it the Jordan Dubai Islamic Bank. On the right path MALAYSIA: The country’s Islamic banking system is on track to achieve its Islamic financial services master plan goal of attaining 20% of the total banking market share by the end of 2010.Currently, the market share of Islamic banking in the total banking sector is 19.6%. Conversion a possibility UAE: Mashreqbank, the parent bank of Mashreq Al Islami, has no immediate plans to turn Islamic, according to Moinuddin Malim, CEO of Mashreq Al Islamic. Facilitating liquidity UAE: The Central Bank of the UAE plans to launch Islamic liquidity facilities within the next three months, said a senior official of the bank. Mohamed Al Tamimi, deputy executive director, said that the new Islamic certificate of deposit will be based on Commodity Murabahah and will be offered in daily auctions. Al Tamimi said the move will enhance liquidity management for local Islamic banks. New software MALAYSIA: Al Rajhi Bank will start using Trasset software solutions for its treasury management purposes, replacing Thompson Reuters’ Kondor+ system. The new software solution has a wide range of applications including Sukuk management, Mudarabah based wealth management and Islamic financing. |
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MALAYSIA: Standard Chartered Saadiq hopes to increase its contribution to its parent group’s total assets to 14% this year from 11% last year. To achieve the target, Azrulnizam Abdul Aziz, CEO and executive director, said the bank plans to open more branches and launch more innovative products. 
SINGAPORE: Malaysia based Khazanah Nasional’s subsidiary, Integrated Healthcare, and India-based Fortis Healthcare are both increasing their stakes in Singapore healthcare group Parkway Holdings ahead of a predicted takeover battle.
INDONESIA: The lack of innovative products in the Islamic banking industry is due to the shortage of human capital skilled in Islamic finance, said Agustianto, secretary general of the Ikatan Ahli Ekonomi Islam Indonesia (IAEI).
JORDAN: The country may either sell global Sukuk or conventional bonds to help fix its budget, as well as seize the advantage of low borrowing costs for foreign grants, according to finance minister Mohammad Abu Hammour.
UAE: The undeveloped debt and Sukuk markets must be further cultivated as alternative forms of financing instead of depending on bank loans.