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Saturday, 15 September 2012

Asia Aims to Be Islamic Finance Hub

Vice President Boediono says Indonesia and Southeast Asia should seek to become the center of global Islamic trade, banking on the region’s economic growth and its large Muslim population.
Islamic merchants from the Middle East once flourished in the region, opening spice trading businesses and contributing to the wealth of kingdoms in the region until the 16th century before being edged out by Western merchants with their military power, Boediono said,
“With that small note in history, and the political and economic progress in Southeast Asia, it is not impossible in the future to develop Indonesia and Southeast Asia to be the center of Islamic trade and set an economic alliance for the Islamic world,” the vice president said in his opening remarks at the Third Muslim World Biz conference and exhibition in Jakarta on Thursday.
Boediono said that momentum is with Indonesia and Southeast Asia, as the West is now struggling with its economy and Asia is becoming the driver of world finances.
“But it all requires a lot of hard and intelligent work,” he said.
Indonesia’s economy alone accounts for 13 percent of the total economy of the Organization of Islamic Cooperation, which combines the economies of 57 member states, according to data from Statistical, Economic and Social Research and Training Center for Islamic Countries (Sesric). Indonesia is also the single largest contributor to the bloc’s output.
Indonesia, Malaysia, Thailand and Brunei Darussalam account for around 28 percent of the bloc’s $8 trillion economy. The 49 OIC member countries are predominately Muslim-majority states, although Muslims are minorities in eight OIC members, such as Thailand.
(Live Trading News / 14 Sep 2012)

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Malaysia: Ringgit sukuk potential big

DUBAI — Several recent landmark corporate and infrastructure sukuk by companies in the GCC issuing in Malaysian ringgit may signal the start of a trend that could help develop and globalise the market, according a new report from Standard & Poor’s, or S&P.

In an era when the world’s conventional banks are producing fewer and shorter loans and companies are considering other options for finance, S&P believes that Islamic financial instruments could become a key funding source, especially in GCC and Asian countries, S&P said in a report entitled, “Beyond Borders: The GCC And Asia Could Rev Up Their Economies – And The Islamic Finance Market”.

These regions, with established Islamic financial regulatory bodies, are centres of the growing market estimated at $1 trillion. At the same time, Asia and the GCC are seeking huge amounts of capital to pay for their soaring needs for new infrastructure.

“We consider the market for Islamic infrastructure in both regions to have reached an inflection point in terms of new issuance after a relative lull from 2009 to 2011. What’s more, we’ve seen the emergence of the first project finance sukuk within the infrastructure asset class,” S&P credit analyst Karim Nassif said.

The GCC market reached over $19 billion in issuances as at July 2012, about the same for all of 2011. Of that figure, infrastructure represented 30 per cent, compared with just seven per cent the previous year, Nassif said.

“The reasons for the surge are low yields, relatively high liquidity, large capital expenditure needs, and strong investor appetite,” he added.

“Total sukuk issued out of Asia reached $57.9 billion in July 2012, compared with $64.9 billion for all of last year. Malaysia is now the world leader in sukuk issuance. Political will, recognition of beneficial ownership, tax incentives, and a rising investor base have all supported the country’s continued growth trajectory,” S&P credit analyst Allan Redimerio said.

Tapping the sukuk market could help improve the capital structure and liquidity profiles of GCC and Asian companies, particularly those operating in capital-intensive industries such as infrastructure. It could provide such companies the longer-term funding they need via a different funding source. This source is becoming more liquid as it reaches across border and becomes more global and grows in scale.

Over the past year or so, GCC companies have been crossing the figurative border into Asia for infrastructure finance. The Abu Dhabi National Energy Company and Bahrain-based Gulf Investment Corp are the first to issue sukuk in Malaysian ringgit.

The ringgit is attractive because of Malaysia’s established regulatory framework for Islamic finance and the wide pool of investors active in that market.

(Khaleej Times / 15 Sep 2012)

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Bank Islam Malaysia’s expansion plan into Indonesia hits a snag

Bank Islam Malaysia Bhd’s (BIMB) plan to acquire shares in PT Bank Muamalat Indonesia (PT Muamalat) has hit a snag as its proposal has been put on hold by the Indonesian party.

The proposal to acquire a stake between 30% and 40% in PT Muamalat was first reported by a business daily in February. “Though we have tried twice and failed, we are not going to give up,” BIMB managing director Datuk Seri Zukri Samat told reporters after the launch of its BIMB Dana Al-Fakhim fund in Kuala Lumpur yesterday.

He cited no reason for the move by the Indonesian party, but said that BIMB is “still interested in Indonesia”. BIMB’s first-half ended June 30, 2012 (1HFY12), results showed net profit increased by 6.15% to RM198.56 million from RM187.05 in the previous corresponding period. The company’s revenue grew 9.9% to RM610.42 million from RM555.23 million a year ago.

Its year-on-year (YoY) customer deposits grew 19.4% or RM4.6 billion to reach RM28.7 billion, while the company’s net financing grew RM2.2 billion or an annualised growth of 32% to reach RM16.4 billion. Its investment arm, BIMB Investment Management Bhd (BIMB Invest), yesterday launched a money market fund — BIMB Dana Al-Fakhim — with an initial size of RM100 million. BIMB Invest’s asset under management (AUM) stood at RM1.5 billion as of yesterday, according to its chief executive officer (CEO) Nazaruddin Othman.

In his speech earlier, Zukri said BIMB Invest is targeting to become one of the providers for the recently launched private retirement scheme by 2015. He said one of the criteria is that the scheme provider must have a minimum AUM of RM1 billion for three consecutive years.

BIMB Dana Al-Fakhim targets the huge potential that exists in the Malaysian total banking system’s current deposit of over RM1.3 trillion (as at June 2012), apart from complementing BIMB Invest's existing portfolio of funds that currently include BIMB i Growth, BIMB Dana Al-Munsif, BIMB Dana Al-Falah and BIMB i Dividend Fund.

The total industry net asset value of these funds stood at RM31.4 billion. Zukri said the demand for Shariah-compliant funds grew more than 15% YoY over the last three years.

(The Malaysian Reserve / 14 Sep 2012)

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