Posts tagged Islamic finance
Malaysia’s biggest lender Malayan Banking Bhd (Maybank) hopes its recent acquisition of Kim Eng Holdings Ltd will strengthen its position in sukuk (Islamic bond) underwriting, after its share slipped from world’s second largest to fourth.
This was despite global sukuk sales growing 37% to US$6.7 billion on the back of economic recovery and growth in Asia and the Persian Gulf. Sales in Malaysia alone grew 51% to $4 billion. Maybank currently has a 9% share in the global market and dominates Malaysia’s 10-year dollar-denominated sukuk issuances, but has been restricted to local business and will need Kim Eng’s international reach to challenge larger players for the top spot, currently held by HSBC Holdings Plc with 24%. Malaysia’s CIMB took second place with 21%, and Standard Chartered Plc third with 13%.
Securities and investment banking group Kim Eng Holdings Ltd has offices in Malaysia, Hong Kong, Thailand, the Philippines, India, Vietnam, London, and New York. Maybank completed a 44.6% acquisition on 10 May this year for S$798 million (US$639 million).
The industry is hoping for a bright future in Malaysia and abroad, with US$444 billion in local economic development projects due to begin soon, and several Malaysian companies expected to begin refinancing later this year. Indonesian local currency issuances have been increasing as well, reaching Rp27.76 trillion ($3.24 billion) in 2010 and Rp17.94 trillion ($2.1 billion) so far this year. According to Bloomberg data, there is $59.3 billion worth of sukuk outstanding worldwide, with around $7.97 billion set to mature in 2012.
source & article: Business Times
The Indonesia Stock Exchange (IDX) is about the launch a new Shariah Stock Index (ISSI) to attract a more diverse range of investors and particularly those in the Middle East. The new index promises to offer a much wider variety of stocks than the 30 currently listed on the Jakarta Islamic Index.
The new index will contain 214 companies at launch, each already listed on the IDX and judged to be compliant in consultation with the Indonesian Council of Ulema (MUI). There will be a compliance review every six months. According to the Jakarta Globe, Shariah-compliant stocks should make up around 43% of the IDX’s total US$398 billion market cap and the list includes companies such as:
palm oil producer Astra Agro Lestari, gold miner Aneka Tambang (Antam), state-owned steel maker Krakatau Steel, vehicle distributor Astra International, consumer goods producer Indofood CBP Sukses Makmur and state telecommunications operator Telekomunikasi Indonesia (Telkom).
Under Islamic law, companies who engage in any business involving alcohol, pork, gambling, speculation or gain money from interest are haram, or forbidden. Lack of current information has restricted many potentially large Muslim investors from putting their money into the stock exchange, both in Indonesia and the Middle East. The ISSI seeks to tap into that increasingly wealthy demographic.
Big things continue to happen for the Iskandar Malaysia economic zone near Singapore. Business Times reports Bio-XCell Sdn Bhd says it’s about to announce a new international investor for the zone’s biotechnology park, with another two lined up to join in the next couple of years.
Bio-XCell, which is at the center of the park’s development and its main promoter, is a joint venture between Malaysia’s Biotechnology Corp Sdn Bhd and UEM Land Holdings Bhd. The three prospective tenants helped secure extra funding from Maybank for the project and have even been named: India’s Biocon Ltd, France’s Metabolic Explorer and US-based Glycos Biotechnologies Inc.
Maybank’s new contribution is worth RM250 million (US$82.45 million) as a 12-year Islamic term facility, enabling the development’s first phase to be completed. The first phase’s total RM950 million ($314.45 million) cost will also be funded by foreign direct investment (FDI) and sale of shares to the public. About RM500 million worth of FDI has already been raised.
Iskandar Malaysia’s biotechnology park is a 29-hectare, 1.125 million sq ft space dedicated to making biotechnology a bigger contributor to Malaysia’s GDP, as well as harnessing the economic advantages of its location in the Johor Bahru growth corridor. The plan is to grow the park in three stages over six years. Bio-XCell’s definition of ‘biotechnology’ includes “biopharmaceutical, industrial technology and green chemical” industries not related to agriculture.
source & articles: Business Times
Japan’s Mitsui Sumitomo Insurance is reportedly interested in tapping into the Islamic insurance market, saying it might buy a share of Malaysian Hong Leong Takaful from its rival Tokio Marine. Mitsui already has an alliance with the Hong Leong Financial Group worth US$480 million and sees an opportunity as demand for Islamic insurance rises, while Tokio Marine is keen to sell its 35% share to focus on a broader insurance strategy, rather than savings-type policies.
Mitsui Sumitomo itself is a unit of MS&AD, Japan’s largest property-casualty insurance company. MS&AD is already in talks to invest in several other Asian insurance firms, while Mitsui is seeking out new opportunities in emerging markets. Japanese financial institutions are looking increasingly overseas as their domestic market shrinks, particularly for large scale infrastructure projects and non-life insurance.
Takaful (Islamic insurance) contributions make up only 1% of the global total, but some such as Ernst & Young have predicted it could be worth $7.7 a year by 2012. The growing wealth of large Muslim populations in Malaysia and Indonesia presents an attractive opportunity for expansion.
source & article: Reuters via Yahoo! Singapore
Qatar Islamic Bank is looking for an acquisition candidate in Indonesia, keen to hit the ground running in a competitive market with an already-established corporate and retail operation in the world’s largest Muslim market.
No decision or short-list has been announced publicly yet. Indonesia has 11 Islamic banks and is seen as the sector’s next big growth market, with shariah banking assets expected to triple to Rp130 trillion by the end of 2011. The Asian Finance bank, 62% owned by Qatar, says it is keen to use Indonesia as a springboard to pan-Asian operations, even looking to markets like South Korea for Islamic finance opportunities. South Korea has recently altered regulations to accommodate the alternative to ‘mainstream’ finance, while Indonesia has taken similar steps such as proposing tax incentives to stimulate sukuk (Islamic bonds) issuance.
source & article: TradeArabia
Entry of Shariah-compliant derivatives into the Malaysian market will fulfill a need and allow the Islamic finance industry to continue growing, with new products from Standard Chartered Plc and Bank Islam Malaysia Bhd. Standard Chartered customers will be able to hedge against price fluctuations in commodities like rice and oil, while Bank Islam Malaysia’s products allow two parties to exchange different forms of payment for an underlying asset.
The word ‘derivatives’ can be contentious in Islamic finance, which often promotes itself as a more ethical and less risky alternative to ‘conventional’ finance. Derivatives trading is often cited as one of the causes of the global financial crisis and similar Islamic products have been more difficult to market, limited hedging opportunities for customers and possibly inhibiting the industry’s growth.
The Bahrain-based International Islamic Finance Market provided standardized legal documentation for Islamic derivatives in March 2010. Standard Chartered’s products are also approved by a panel of Shariah experts to ensure they fulfill the requirement that Islamic investments must be backed by underlying tangible assets.
Derivative products are seen as necessary in all areas of finance to protect against the large number of variables affecting international investment and trade. Fluctuating values of anything from stocks, commodities, real estate currencies and even weather may have a large impact on an investment’s performance. The Islamic finance industry has been innovating for years to create accepted standards for products to match this demand, and is optimistic the new offerings will further consolidate the sector in Southeast Asia and worldwide.
source & full article: Bloomberg
Maybank already operates the largest Islamic bank by assets in Malaysia and the Asia Pacific region, and hopes to be ASEAN’s number one Islamic bank in terms of reach by 2015. It just took a major step towards this goal by converting its Indonesian subsidiary into a full fledged Islamic bank.
The former Bank Maybank Indocorp (BMI), which had specialized in wholesale services to corporate clients such as trade finance and treasury services, officially changed its name to Maybank Syariah Indonesia this week. This followed its status change to shariah-compliant Islamic bank in October.
Indonesia, home to a growing economy and the world’s largest population of Muslims, is vital to the strategy of any Islamic bank seeking regional domination. MSI will leverage its existing operations in the country to expand into retail services like Islamic credit cards and investment products for high net worth individuals. Its corporate segment will look at financing for Indonesian growth sectors such as natural resources, construction and automotive.
source & article: The Edge Malaysia
Business Times sees a prime opportunity for Malaysia to promote its brand amid the hype and development boom surrounding FIFA’s decision to award the 2022 World Cup to the Gulf state of Qatar.
For one, it shows that international bodies like FIFA are prepared to make inroads into new and non-traditional (to them) markets, giving hope to other emerging Muslim countries like Malaysia and Turkey who both have desires to stage major events of their own (and in the case of Kuala Lumpur’s Commonwealth Games, have already done so).
Qatar’s success itself presents opportunities for developers and, importantly, financial service providers. With a rare 12 year run-up to the big event, there is plenty of time to promote Islamic finance with a coherent and appealing message. BT suggests a proper industry body be established immediately, consisting of industry stakeholders to “create a blueprint for the future beyond screening, structuring and products.”
Financing the new stadiums and related tourist infrastructure is another chance for Malaysian banks to go global, competing with large Gulf-based Islamic banks and marketing their expertise and track record to investors and developers. Malaysian banks should also look at securing naming rights to one of the stadiums, and the local US$640 billion halal industry needs to capitalize on the Muslim world’s first truly global event. Phew. After all that, there’s the issue of whether Malaysia’s national team can make it to the finals…
source & article: Business Times
“No liquidity, no track record and not enough expertise” — these are some of the external criticisms the Islamic finance world must overcome in order to broaden its appeal beyond traditional markets, says CIMB-Principal Islamic Asset Management chief executive Noripah Kamso.
Islamic stocks, bond-equivalents and asset management have been getting more attention in the mainstream business media in the past few years as Muslim countries’ economies grow and non-Muslims are increasingly looking for investment alternatives. The Dow Jones Islamic World Market index shows the sector has well out-performed ‘traditional’ investments over the past five years. Southeast Asians understood how Islamic investing could fit into their lifestyles but potential customers in Europe and North America still needed more education on the sector’s stability and what it had to offer them, Noripah said.
Others say the sector itself should do more to appeal to non-Muslim investors, who may not fully appreciate the lifestyle aspects of the business but could enjoy good returns and less risk than mainstream offerings.
Singapore’s first Islamic real estate investment trust (REIT), Sabana REIT, was listed on Friday and attracted plenty of attention from Muslims and ‘conventional’ investors alike, a quarter coming from the Middle East. HSBC’s Islamic unit HSBC Amanah is now exploring other opportunities in Malaysia and Singapore, with predictions that Sabana will pave the way for other Islamic REITs to follow sometime in 2011 and after.
Sabana REIT is the world’s largest Shariah-compliant property trust. Last week’s IPO saw 508 million units sold at S$1.05 (US$0.79) each and, although the IPO was 2.5 times subscribed, a nervous market saw that price fall to S$1.02 by closing time on Friday. HSBC Amanah’s CEO Rafe Haneef said he expected the percentage of Gulf investors to increase with future Asian offerings.
source & article: Reuters via alwatandaily
see also: Malaysia launches first Islamic REIT to local Muslim Malays and indigenous investors under a government plan to encourage local investment in property.