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Monday, 5 November 2012

CIMB Australia plans to leverage on sukuk market deals

SYDNEY: CIMB Group Bhd, Malaysia’s second largest lender, hopes to use its expertise in Islamic finance to distinguish itself from the competition when it formally opens its Australian operations this week, company executives said.
That may include bringing Australian companies to the Malaysian sukuk market as issuers for the first time.
“We are very keen to do an Islamic finance transaction as soon as possible, but we also have to be realistic, working on a 12-month time frame,” Michael Forde, head of capital markets at CIMB Australia, said in an interview late last week.
Malaysia’s liquid sukuk market has already attracted interest from international issuers including those from Saudi Arabia, Bahrain, Kazakhstan and Hong Kong. This spurred sukuk issuance to RM153.9bil in the first half of this year, according to Securities Commission data.
“It is an excellent source of new liquidity for issuers from this part of the world, and we want to utilise the competitive advantage we have to bring these Australian issuers to this market,” Forde said.
By 2020, the Malaysian Government aims for the amount of outstanding sukuk to hit RM1.3 trillion.
“Much of this growth is projected to be driven broadly by further internationalisation of the Islamic capital market,” Nik Ramlah Mahmood, deputy chief executive of Malaysia’s Securities Commission, said in a speech in April.
CIMB Group, with assets of RM316bil as of June, includes CIMB Islamic, which is one of the world’s largest arrangers of sukuk.
CIMB expected to officially launch its Australian investment banking franchise on Nov 5, upon completing all regulatory procedures, with over 100 staff in its Sydney and Melbourne offices combined, a company spokesman said.
In April, CIMB acquired most Asian operations of Royal Bank of Scotland (RBS) for RM432mil, including its Australian cash equities, equity capital markets and mergers & acquisition businesses.
The bank said it was able to retain most RBS senior staff. This could help CIMB when it contacts Australian companies to try to interest them in sukuk structures, which unlike many conventional bonds were directly based on income from real assets.
“Australian firms will be very new entrants to this market it will require educating institutions who invest in this market. It is not as straight-forward from an Australian point of view, because you are buying and selling assets, instead of direct borrowing,” Forde said.
(The Star Online / 05 Nov 2012)
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