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Friday, 31 October 2014

Islamic finance & management events in Kuala Lumpur Malaysia

Date: 25-26 November 2014
Event: Executive Workshop on Islamic Wealth Management & Financial Planning
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Date: 17-18 March 2015
Event: KL Conference on Islamic Finance
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Date: 21-22 April 2015
Event: KL Conference on Islamic Wealth Management
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Organizer: Alfalah Consulting

Islamic banking on the rise

The international financial crisis of 2008 constituted a historic chance for the Islamic financial sector to prove its worth and success in facing crises. It also proved to be a safe haven for capital, as well as Arab, Islamic and non-Islamic investments. The crisis encouraged individuals, companies, governments and large financial institutions to shift to Islamic banking.

The last financial crisis, its consequent dangerous repercussions on the international financial system and the impact it had on various financial institutions in the region, showed the sound principles of the Islamic financial industry. The latter has various aspects that contribute to security and safety and limit the risks, such as credibility, transparency, evidence, facilitation, cooperation, integration and solidarity. Sharia prohibits economic and financial transactions that are based on gambling, monopoly, exploitation and greed.
Among the main principles of the Islamic economic and financial system are the sharing of gains and losses, and the real circulation of money and assets. Sharia prohibits financial derivatives that are based on fake trade deals dominated by ignorance. These principles produced trust in the Islamic financial system, increased demand on its services and products as shown by the Islamic banking industry's growth rates, such that many banks and Arab financial institutions adopted this system.
The Ernst & Young financial consultancy announced that Islamic banking assets had increased by 17.6% annually during the period extending from 2009 to 2013. It said that these assets would grow by an average of 19.7% annually until 2018. This showed that Islamic banking shifted from closed to global activity, and showed the accuracy of what we expected at the beginning of the international crisis.
In the Gulf banking markets, a number of major Arab banks in Saudi Arabia, Kuwait, the United Arab Emirates and Oman are increasingly moving toward adopting the Islamic banking model. This is also the case for a number of Arab countries such as Tunisia, Libya and Morocco, which issued special legislation regarding Islamic banking, not to mention Turkey, which has been encouraging the establishment of Islamic banks for years, and had finally founded the Agricultural Bank based on the Islamic system.
Therefore, Sharia-compliant banking assets in international banks grew to reach $1.7 trillion at the end of 2013. Estimates show that they will exceed $2 trillion by 2014. Furthermore, Islamic banking assets in the Gulf Cooperation Council (GCC) increased from $452 billion in 2012 to $525 billion at the end of 2013. Saudi Arabia topped the list with Islamic banking assets amounting to $260 billion, followed by the UAE with $90 billion and Qatar with $60 billion. The six GCC countries comprise 13 Islamic banks, which are among the world’s 15 largest banks, with a capital of more than a billion dollars each.
Malaysian and British markets rose as active markets in terms of bonds issuance and the embracing of Islamic banks. Between 2002 and 2012, annual bond issuance increased by an average of 35%, from $4 billion to $83 billion. Malaysia is at the top of the list of Islamic countries in this area, while Britain became the first Western country to issue sovereign Islamic bonds worth 200 million pounds [$320 million], through which it succeeded in attracting investors from around the world. The said investors pumped in around 2.3 billion pounds [$3.6 billion].
Global financial institutions, such as the French Societe Generale, the Bank of Tokyo-Mitsubishi UFJ and Goldman Sachs, also issued Islamic bonds. Other countries also expressed interest in issuing Islamic bonds, such as Luxembourg, Russia, Australia, the Philippines and South Korea. During the meetings of the International Monetary Fund and the World Bank in New York in mid-October, a part of the agenda items and meetings were dedicated to discuss Islamic banking and the Islamic economy, and how to take advantage of it to protect the global economy and develop global models of development.
(Al Monitor / 30 October 2014)
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WIEF Dubai: Islamic finance adds up across the world

Over three days of speeches, debate, policymaking, and plain old marketing one theme emerged as dominant from the 10th World Islamic Economic Forum in Dubai: Islamic finance has gone global, both as a concept and as a hard business reality.
After two years on the road — last year in London and 2014 in Dubai — the annual forum is set to return to its home base, Kuala Lumpur in Malaysia, next year.
But in the meantime, it will hold warm-up sessions in South Korea, Spain and Japan, all countries with small Muslim populations.
The World Bank recently had a session devoted to Islamic finance; the list of sovereign sukuk issuers recently includes countries well outside the traditional Muslim world, such as Luxembourg, South Africa and the UK.
The Dubai forum heard of Islamic financing schemes in Afghanistan and Tartarstan (an autonomous part of Russia); President Nazarbayev of Kazakhstan won the award of Islamic financial leader of 2014; there was talk of Brazil or Australia as the next sovereign sukuk issuer.
There was general agreement that Islamic finance, specifically, was the driver behind the worldwide growth of the Islamic economy. “We have learnt that Islamic finance provides fuel for the real economy,” said Abdulla Al Awar, chief executive of the Dubai Islamic Economy Development Centre, which aims to make the emirate the capital of the Islamic business within the next two years.
Although the forum addressed all the aspects of the Islamic economy — the halal food industry, tourism, fashion, education and others — there is no doubt that finance is at the heart of it. Of the US$6.7 trillion total estimated value of the Islamic economy worldwide, more than $4 trillion is in the financial sector.
Khalid Howladar, head of Islamic finance at ratings agency Moody’s Investor Services, said: “I could never have said this five years ago, but I think we are seeing a sea change in thinking about Islamic finance. This is where Islam meets capitalism, and where Islamic finance truly becomes a global concept.”
But the three-way tug in the global Islamic financial industry was still very much in evidence as the forum closed in Dubai. Figures from the organisers showed that the top attenders among the 3,200-strong gathering were from Malaysia, with 430 participants; followed by London with 201 and the UAE (on home ground) with 176.
Other notably large delegations came from India and Bangladesh.
These figures, however, raise the question: where were the other great powers of the Islamic economic world? Saudi Arabia and Iran, big regional powers in terms of economies and populations, were barely represented at the Dubai forum. Other GCC countries, notably Oman, had a slightly higher presence, but were still apparently publicity-shy at the biggest Islamic economy show in the world.
Some experts thought this reflected a lack of certainty in the Islamic financial world about how to take the project to the next stage. Ashruff Jamall, global Islamic finance leader at international accounting firm PWC, said there needed to be some “sustainable follow-through” on the good intentions and ideas expressed at the forum.
“There has to be lots more specialist training in Islamic finance, and there needs to be standardisation of Shariah boards in the GCC region. In Malaysia, it is centralised, but in the UAE, it is different for each bank.”
The urge to consolidate and unify was another of the themes of the forum. Mohammed Al Gergawi, UAE Minister for Cabinet Affairs, called for common halal food standards between Malaysia and the Emirates, while Hamad Buamim, chief executive of the Dubai Chamber of Commerce and Industry, urged the UAE financial industry to set up a standardised Sharia-compliance system.
Why had this not already happened, given standardisation has been a key feature behind Malaysia’s dominance of the global sukuk business? There were suggestions that the blame lay with the current system of disparate Sharia boards chosen from the relatively small number of scholars qualified to issue fatwas, who had a vested interest in maintaining their monopoly.
If this is the case, there was no shortage of new ideas at the forum to keep Islamic finance a dynamic force. Alberto Brugnoni, who runs an Islamic financial consultancy, advocated “Islamic crowdfunding”, which he called “umma funding”, to help finance small-to-medium enterprises along Islamic lines.
Several speakers suggested the notion of some form of Islamic equity, shares which adhered to Sharia principles and which would be less risk-prone and more socially responsible than conventional and Islamic debt financing.
Mr Howladar said: “There is no point in Islamic finance simply replicating conventional financial instruments. It is different and should create its own value adhering to Sharia principles and ethics.”
There was also a job or marketing to be done. Mr Jamall of PWC identified a “perception gap” between potential Muslim banking customers and the banks offering them services. “The banks need to be stronger in their messaging to customers that they are acting according to Sharia principles,” he said.
Mr Buamim summed up the message to the world from the Dubai forum: “A modern image of Islam needs to be projected, a kind of liberal but dynamic Islam the world is not fully familiar with yet.
(The National Business / 30 October 2014)
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Thursday, 30 October 2014

Malaysia Oil-Rig Sukuk Clouded by Crude Slump

Malaysia’s biggest oil-rig builder faces a double-whammy of collapsing crude prices and rising local borrowing costs as it plans to sell a debut sukuk.
Malaysia Marine and Heavy Engineering Holdings Bhd. has set up a 1 billion ringgit ($306 million) Islamic bond program to fund upgrading works at one of its facilities, according to an Oct. 14 statement from Malaysian Rating Corp. The company, which is indirectly owned by state-oil firm Petroliam Nasional Bhd., is tapping the market as the central bank considers whether to add to its first interest-rate increase since 2011.
A 24 percent slump in crude prices from this year’s peak threatens to crimp earnings from oil and gas services in Malaysia, which Prime Minister Najib Razak has earmarked as a hub for the region’s energy industry. Shariah-compliant debt sales have climbed 65 percent in 2014 to 50.3 billion ringgit from a year earlier and have already surpassed 2013’s total, data compiled by Bloomberg show.
“Rig builders such as MMHE will see their profits falling as oil majors are unlikely to continue pumping given current crude prices,” Lam Chee Mun, a Kuala Lumpur-based fund manager at TA Investment Management Bhd., which oversees about 680 million ringgit, said in an Oct. 27 phone interview. “Companies will have to pay more because borrowing costs are rising.”

Rising Yields

MMHE is 66.5 (MMHE) percent-owned by the nation’s shipping company MISC, which in turn is 62.7 percent controlled by Petronas. The sukuk was given a preliminary AA- rating by Malaysian Rating, the fourth-highest investment grade, according to the statement. No details on the debt’s maturity or timing were provided.
Analysts are forecasting a drop in the company’s net profit to 170.5 million ringgit this year, from 236.4 million ringgit in 2013, according to the median estimate in a Bloomberg survey. Crude was at $81.72 a barrel today, compared with the year’s high of $107.26 in June, data compiled by Bloomberg show.
TA Investment’s Lam said MMHE may have to pay a yield premium of one percentage point more than Malaysia’s sovereign securities for its sukuk assuming it’s a five-year maturity.
Yields on the government’s Shariah-compliant debt have climbed since the central bank raised its benchmark interest rate to 3.25 percent from 3 percent in July. The swaps market is pricing in another increase ahead of the next meeting on Nov. 6, with one-year contracts at 3.75 percent.
The yield on the two-year sovereign sukuk was last at 3.49 percent, up from 2014’s low of 3.24 percent in February, while five-year debt yielded 3.81 percent from 3.77 percent in May, Bank Negara Malaysia indexes show.

‘Ultimate Parent’

James Lau, an investment director at Pheim Asset Management Asia Sdn., said MMHE will have to compensate investors for the risk from declining oil prices, the company’s slowing growth and rising borrowing costs.
“Investors will demand a premium,” Lau, who oversees $300 million in Kuala Lumpur, said in an Oct. 27 phone interview. “While investors can take comfort in Petronas being the ultimate parent, it wouldn’t be prudent to rely on that support as they are different entities.”
The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, a benchmark that tracks the most-traded local-currency notes, gained 2.3 percent this year to an all-time high of 107.51 after rising 2.8 percent in 2013.
Prime Minister Najib is seeking to boost the nation’s oil and gas industry as part of his $444 billion 10-year economic transformation program geared to achieving developed-nation status by the end of the decade.

Order Book

MMHE has a market capitalization of 3.7 billion ringgit, data compiled by Bloomberg show. The company operates the largest fabrication yard in Malaysia with an annual offshore construction capacity of 129,700 metric tons, according to the statement from Malaysian Rating. It had an order book of 1.8 billion ringgit as of June, down from 2.6 billion ringgit at the end of 2013, the assessor said.
A joint venture started in July 2011 with Paris-based Technip SA has been awarded two contracts from Sabah Shell Petroleum Company Ltd. and Petronas Carigali, according to a Sept. 24 e-mailed joint statement.
“As long as the oil and gas industry continues to thrive, more companies are expected to tap the ringgit market,” Mohd. Effendi Abdullah, head of Islamic markets at Kuala Lumpur-based AmInvestment Bank Bhd., said in an Oct. 27 phone interview. “This is because the oil and gas industry, like infrastructure, has underlying economic activities that fit well with Shariah financing.”
(Bloomberg / 29 October 2014)
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Why Islamic finance is the wave of the future

Dubai: Islamic finance will become a norm rather than an alternative — as it currently is — in the near future, driving the growth of small and medium enterprises (SMEs) and Islamic trade, said leading Islamic banking professionals at the 10th World Islamic Economic Forum (WIEF) in Dubai on Wednesday
The opening session on the second day highlighted the importance of developing a standardised documentation process to facilitate the growth of Islamic trade finance.
In his keynote address, Hussain Al Qemzi, Board Member of the Dubai Islamic Economy Development Centre and CEO of Noor Islamic, said that SMEs play a large role in driving Islamic trade finance, adding that more advanced supply chain optimisation measures are needed to promote their growth.
At the panel discussion, Dr Adnan Chilwan, Chief Executive Officer of Dubai Islamic Bank, said that the potential for promoting Islamic finance among the Organisation of Islamic Cooperation (OIC) countries is tremendous and that Islamic finance and Islamic trade go hand in hand. “Islamic banking will not be an alternative but the norm of banking in the near future,” he added.
Muzaffar Hisham, Chief Executive Officer of Maybank Islamic Berhad, Malayasia, said that regulatory frameworks have a strong role to play in promoting Islamic finance, citing the strong growth in business between Malaysia, Indonesia and Singapore, following the introduction of governmental policies to promote trade. “The hurdles between policymakers must be cleared to boost Islamic trade finance,” he noted.
Arif Usman, General Manager, Global Head of Wholesale Banking, Abu Dhabi Islamic Bank, said that securing funding for start-up SMEs is a challenge, while Toby O’Connor, Chief Executive Officer, The Islamic Bank of Asia in Singapore, said that along with financial support, SMEs also need human support through adequate advisory services. Dr Chilwan pointed out that venture capital funding is practically lacking today for SMEs, despite the great emphasis that the region places on promoting the sector.
Clear cut policies for liquidity transfer among OIC countries and the emerging role of Islamic finance in Sub-Saharan and East African nations were also highlighted at the panel discussion, which concluded on the note of optimism that Islamic finance is growing in the right direction and will claim its share in global trade finance.
(Gulfnews.Com / 29 October 2014)
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