Qatar Islamic Bank (QIB) UK to launch first sukuk-linked note this month

London-based QIB UK, a subsidiary of Qatar Islamic Bank, plans to launch two structured products this month including a note linked to a sukuk, its head of asset management told Reuters.

It will be the first time in the industry that a structured note uses a sukuk as an underlying asset, Anouar Adham, head of asset management at QIB UK, told Reuters late on Wednesday. The capital-protected note will be based on a five-year sukuk which Qatar Islamic Bank is expected to issue soon, he said.

"We are planning to launch the product before month-end. We expect this new ground-breaking structure to take off substantially," Adham said.

The firm has raised $153 million through the first six products of its "Hemaya" structured note programme; the previous notes were linked to equities listed on the Qatar, Saudi Arabia and Abu Dhabi stock exchanges.

The new product will address growing investor appetite for sukuk, and be launched alongside an equity note based on Islamic bank stocks listed in Qatar and Saudi Arabia.

QIB UK manages the world's largest sukuk fund with $213 million in assets as of June. It raised $100 million last year, and has an institutional investor base of mostly takaful and re-takaful institutions (Islamic insurance and re-insurance).

STRUCTURES

Client concerns about liquidity and regular payment options influenced the design of the latest products, which will feature semi-annual payments, Adham said.

Islamic capital-protected products have started to gain ground among investors, because of volatility in the equity markets and growing acceptance in the industry that the protection aspect does not violate Islamic law.

QIB UK's new product features a new type of sharia-compliant structure as it relies on sukuk issuance for capital protection instead of murabaha trades, Adham added. Details of the structure could not be disclosed.

In the past, the guaranteed principal in Islamic capital-protected products was often delivered using a murabaha, a cost plus mark-up contract that delivers a return similar to a zero-coupon bond.

But the industry has been moving away from murabaha because of concerns about its legitimacy, and various alternatives have been used including a structure known as wa'ad, a "unilateral promise".

(Reuters / 19 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
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Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Ireland's Electricity Supply Board (ESB) considers sukuk issue in Malaysia

Ireland's Electricity Supply Board (ESB) is considering whether to become the first large non-financial company from Europe to sell Islamic bonds by issuing a sukuk in Malaysia.

The issue could help to develop a new source of funding for European firms as the euro zone debt crisis constrains sources of finance at home. Sukuk are bought by cash-rich Islamic funds in the Gulf and southeast Asia.

"As part of ESB's overall funding programme, we are exploring many different options and are looking at the option of a bond in Malaysia," a spokeswoman for the state-owned utility said by email on Wednesday. A sukuk is one of the options being considered, she added.

Kieran Donoghue, head of the Irish Development Authority (IDA), told Reuters that ESB was considering a sukuk issue within the next 12 to 18 months. The IDA, a government organisation which attracts foreign direct investment to Ireland, is assisting the company with the issue, he said.

A source familiar with the matter said ECB had applied to local regulators for permission to issue a sukuk, and that the company might raise 1 billion euros ($1.3 billion).

Structuring of the sukuk could begin as early as January, once the application is approved by Malaysia's central bank. It might have multiple tranches denominated in currencies such as U.S. dollars and Malaysian ringgit, the source said.

ESB operates seven thermal power stations and ten hydro stations in Ireland, and has over 12 billion euros in assets with operating profits of 469 million euros in 2011.

These assets could be used to back the sukuk; because of Islam's ban on interest payments, sukuk pay investors with profits derived from assets.

Earlier this month ESB issued a 600 million euro, five-year conventional bond through its unit ESB Finance Ltd, which is rated BBB+ by Standard and Poor's.

"The recent issuance should be able to sustain them for a while," the source said.

Liquidity needs for the company, however, will exceed 900 million euros over the 12 months from June 2012, with 700 million euros required for capital expenditure alone, S&P said in an August report.

DEMAND

A sukuk issue by an investment-grade European company like ESB might have little trouble in attracting investors because globally, there is a large imbalance of demand over supply for sukuk, analysts say.

In Malaysia, sukuk accounted for nearly half of total bonds outstanding in the first half of this year, reaching 421 billion ringgit ($137 billion), compared with 35 percent in the same period last year, data from the Securities Commission shows.

Because of the strong demand, some global sukuk issuers this year have been able to raise money more cheaply than they could through conventional bonds.

"For a triple-A bond or sukuk, issuers can gain savings of up to 4 basis pointss to 6 bps. This may not be very much, but if the issuance size is big, the savings can be quite substantial," a Malaysian central bank official said.

The handful of previous sukuk issues by European entities have included a 100 million euro issue in 2004 by the German state of Saxony-Anhalt, and a $10 million issue in 2010 by International Innovative Technologies, a maker of milling machines in northeast England. The Middle East unit of European bank HSBC issued a $500 million sukuk last year.

Ireland has sought to position itself as a financial services hub and identified Islamic finance as a growth area. In June, Dubai's Jebel Ali Free Zone listed a $650 million, seven-year sukuk on the Irish stock exchange.

"There is the political will and determination to develop Islamic finance," said Neil Ryan, assistant secretary for the financial services division of Ireland's Department of Finance.

He said he was aware of an Irish company planning to issue sukuk, but declined to give details. "The decision to do this is up to them, but I think it will be determined by the price they achieve," he said.

"Islamic nations have cash, and Europe needs it."

(Reuters / 20 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Thomson Reuters launches global sukuk index

SINGAPORE: Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, has announced the launch of the Thomson Reuters Global Sukuk Index.

The index is an independent and transparent benchmark for investors seeking exposure to sukuk (syariah-compliant) fixed-income investments, to be used to monitor the performance of the sukuk market. The announcement of the launch of the index was made yesterday at the Global Islamic Finance Forum (GIFF) 2012 in Kuala Lumpur, it said in a statement released here.

The US$1.2 trillion Islamic finance industry is currently growing at more than 15% per annum, and it is led by the Islamic debt capital market, which is primarily composed of sukuk. It is frequently the topic of conversation by regulators, international lending agencies, bankers, and asset managers in the G20 countries as well as the 57 Muslim countries for raising funds.

The Thomson Reuters Global Sukuk Index will attempt to bridge the challenge of information asymmetry in the global sukuk market.

Rushdi Siddiqui, Thomson Reuters global head of Islamic finance, said: “These are unprecedented times for the US$214bil sukuk market.”

He said there had been defaults, restructuring, maturing, rollovers, corporate issuers, launch of sukuk funds, announcement of secondary market platforms (Saudi Arabia), innovative issuance (Khazanah’s renminbi), sovereigns declaring issuance (South Africa), and the growing development of the Islamic debt capital market to complement the bank financing model.

“The common denominator of need here is an independent benchmark, including independent pricing, to measure accountability and performance. We spoke to customers and listened to their feedback about sukuk data collection, methodology and pricing. We quickly realised that there is a need for an independent entity such as Thomson Reuters to provide impartial data to inspire confidence and trust for investors,” he said.

In addition to being primarily used as a benchmark for investors seeking exposure to syariah-compliant fixed-income investments, the Global Sukuk Index may serve to increase secondary market trading in this growing asset class and facilitate cross-market relative value trading among different asset classes.

(The Star Online / 19 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Islamic banker Iqbal Khan receives Royal Award for Islamic Finance

KUALA LUMPUR: Prominent Islamic banker Iqbal Khan has received the Royal Award for Islamic Finance for accelerating the global growth and accessibility of Islamic finance.

He received the award from the Yang di-Pertuan Agong on Wednesday night for his dedication, drive and extraordinary leadership in Islamic finance. He is the second recipient of the prestigious award.

The Securities Commission said Iqbal Khan was selected from among 32 nominations, comprising influential leaders with various backgrounds in the Islamic finance industry from the Middle East, Europe, Africa, North America and Asia Pacific.

It said the award selection criteria focused on both qualitative and quantitative aspects to honour an individual's exceptional contribution to the global development of Islamic finance, in the areas of financial innovation, exceptional leadership and vision, serving as an inspiration and influence towards future progress and development in this arena. The chairman of the jury panel, Tun Musa Hitam, in his comments, pointed out the jury went through a very stringent and rigorous selection process on the nominees' merits and achievements, which resulted in several rounds of deliberations, followed by a very robust discussion on the critical and objective assessment of the shortlisted candidates before arriving at a final decision.

"The award recognises Iqbal Khan's contribution towards the development of Islamic finance that serves as an inspiration for the next generation," he said. The SC statement said Iqbal Khan had a prominent role in facilitating, promoting and innovating Islamic finance on a global scale.

Iqbal Khan was instrumental in establishing a number of institutions and initiatives in the Islamic finance industry, including Citi Islamic Investment Bank, the Islamic Finance Project at Harvard University, Meezan Bank, HSBC Amanah and most recently Fajr Capital, of which he is Founding Board Member and Chief Executive Officer.

Apart from helming Fajr Capital Ltd, Iqbal Khan is also chairman of the executive committee and board member of Jadwa Investment in Saudi Arabia. In 2006, he received the Euromoney Award for Outstanding Contribution to Islamic Finance, and was nominated and voted by the Islamic Financial News as the Best Individual Islamic Banker for 2005. He was also recognised by the United States House of Representatives in 2000 for his contribution in the field of finance and economics. In the same year, he won the LARIBA Award for Excellence in Islamic Banking Practitioner's Division. The Royal Award was spearheaded by the Malaysia International Islamic Financial Centre initiative and supported by Bank Negara Malaysia and the Securities Commission. Dallah Albaraka Group founder Shaikh Saleh Abdullah Kamel of Saudi Arabia was the first recipient of The Royal Award for Islamic Finance in 2010.

(The Star Online / 20 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com