Entries in English and Malay (Bahasa Melayu)

Thursday, 4 October 2012

Malaysia: International Islamic Liquidity Management (IILM) says first sukuk to debut within months

Kuala Lumpur-headquartered IILM, established last year, aims to issue short term sukuk, or Islamic bonds, to help sharia-compliant banks manage liquidity and create a liquid cross-border market for Islamic instruments.

Issuance of the first sukuk has been delayed. IILM has faced a big challenge to ensure it complies with laws in all of the 12 countries in which its members are, Chief Executive Officer Mahmoud AbuShamma told Reuters in an interview late Tuesday.

"It does not require an extreme amount of effort, but we're setting up a product that is ever-expanding and has many complexities," said AbuShamma, a former HSBC executive who launched Indonesia's first Islamic banking unit operated by a foreign bank.

He said that IILM is 85 percent prepared for the first issuance, and what remains to be worked out are "some highly technical issues."

"It's not our mandate to issue one sukuk and go off on a holiday, we should be manufacturing a continuous supply of it," he added.

Eventually, IILM will issue sukuk totaling more than $2 billion a year, AbuShamma predicted.

IILM members include monetary authorities in Indonesia, Iran, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Saudi Arabia, Sudan, Turkey and the United Arab Emirates as well as the Islamic Development Bank ISDBA.UL and the Islamic Corporation for the Development of the Private Sector.


AbuShamma said IILM will initially focus on U.S. dollar-denominated sukuk, as central banks have already met the need for local-currency, short-term instruments.

"Because we are looking to issue at a regular pace, we first need to test the market. It's very critical to assess the engine itself, the capacity of the institution, the system and our processes to see if it is efficient and safe," he said.

The maiden sukuk will use an asset-backed leasing structure in line with an Islamic principle called al-Ijarah. It will aim to get high-quality ratings from international rating agencies, AbuShamma said.

"The pool of assets we're going to have will predominantly be sovereign assets from our member countries," said AbuShamma.

He added the sukuk will be distributed by a network of primary dealers, of which there will be up to two elected in each member's jurisdiction.

The first sukuk will be traded in a secondary market, which could pose fresh challenges as investors prefer to hold Islamic bonds until maturity instead of trading them.

"We have a lot of faith in the dealers, it will be their role to underwrite the issuance and create a secondary market," AbuShamma said.
(Reuters / 03 Oct 2012)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic finance : Standard Chartered launches Islamic Euro Nostro Account

Karachi: Standard Chartered Bank on Wednesday announced the launch of the industry’s first Islamic Euro Nostro Account. Islamic banks across the world will now be able to earn Shariah-compliant profits on their account balances at Standard Chartered Bank’s Germany branch in Frankfurt.

Bank Alfalah, one of the leading banks in Pakistan is the first to sign an agreement with the British-based bank for Islamic Euro Nostro Account at the recently concluded Bankers Conference 2012 which was held in Istanbul, Turkey.

The Standard Chartered ‘Saadiq’ Euro clearing Account utilises a Shariah-compliant account sweep facility. At the end of each business day, available balance in client’s ‘Saadiq’ clearing account will be invested using the Islamic finance mode of Murabaha. Profit generated from these transactions will be credited on a monthly basis.

(The Express Tribune / 04 Oct 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Turkey: Sukuk Taking Flight as Airline Readies Debut Sale

Turkey’s Islamic bond market is gathering momentum as companies from the national airline to the biggest telephone operator plan offerings after the government sold its first local-currency sukuk.
Turk Hava Yollari AO, or Turkish Airlines, and Turk Telekomunikasyon AS (TTKOM) have contacted banks that may be hired for a sale, people familiar with the matter said yesterday. The government raised 1.62 billion liras ($904 million) from its first sale of lira-denominated sukuk yesterday. The yield on its $1.5 billion debut sukuk sold Sept. 18 has dropped seven basis points to 2.95 percent yesterday compared with average yields of 3.15 percent for the Gulf Cooperation Council debt, based on data compiled by Bloomberg and the HSBC/NASDAQ Dubai GCC U.S. Dollar Sukuk Index.
The government’s dollar sukuk sale set a benchmark for companies in a market luring Middle East investors seeking to diversify. Global sales of sukuk, which comply with Islam’s ban on interest, rose above $37 billion for 2012, beating last year’s record $36.7 billion, data compiled by Bloomberg show.
The government has “opened up the possibility for other corporates to come in and issue,” Abdul Kadir Hussain, Dubai- based Chief Executive Officer of Mashreq Capital DIFC Ltd., who bought Turkey’s dollar sukuk, said by phone Oct. 1. “The underlying long-term story for Turkey is still positive in terms of the momentum and the direction of the economy.”

Turk Telekom

Turkey’s gross domestic product may expand about 3 percent this year, according to the estimates of 20 economists on Bloomberg, more than double the pace of the Group of 10 advanced countries. Turkey’s almost $800 billion economy is the biggest in eastern Europe and the Middle East excluding Russia.
Demand for the government’s two-year lira sukuk was more than twice the amount on offer at 3.28 billion liras, the Treasury in Ankara said in a statement yesterday.
Turkish Airlines may use money from the sukuk sale to help finance planned aircraft purchases, one of the people with knowledge of the plans said yesterday, declining to be identified because the details are confidential. The company is considering buying at least six superjumbos, Chairman Hamdi Topcu said in an interview at an airshow in Istanbul Sept. 6.
Tender terms will be presented to Airbus SAS and Boeing Co., makers of A380 and 747-8 widebody planes, he said.

Sukuk Market

Sukuk issuers will benefit from tumbling borrowing costs for Islamic debt. The yield on global sovereign sukuk plunged 102 basis points, or 1.02 percentage points, this year to a record low of 2.88 percent Sept. 28, according to the HSBC/NASDAQ Dubai Sovereign US Dollar Sukuk Index. The yield was 2.91 percent on Oct. 1, the data show.
“We are expecting Islamic banks to assess sukuk sales and they will be followed by companies from real estate and leasing industries,” Basak Selcuk, deputy director for corporate finance at Is Investment, said by e-mail yesterday. The Istanbul-based brokerage was a co-manager in the state’s sale.
Turkish units of Shariah-compliant banks have already tapped the sukuk market. Kuveyt Turk Katilim Bankasi AS, an Istanbul-based Islamic Bank owned by Kuwait Finance House KSC (KFIN), sold $350 million of five-year sukuk yielding 5.875 percent, according to data compiled by Bloomberg. Is Investment expects as much as 200 million liras of further sukuk sales by Islamic banks in Turkey this year, and total sukuk sales in the country in 2013 “at least to double from this year,” Selcuk said.

Debt Ratings

Albaraka Turk Katilim Bankasi AS (ALBRK), a unit of Bahrain’s AlBaraka Banking Group (BARKA), canceled a debut sale 10 months ago as yields were too high. The bank still plans to raise as much as $250 million of seven-year dollar-denominated sukuk this year, Adnan Yousif, the group’s chief executive officer, said by phone Aug. 27.
The boards of Turk Telekom and Turkish Airlines (THYAO) have yet to approve the possible sukuk sales and the size of the issues hasn’t been determined, the people said. Ali Genc, a Turkish Airlines spokesman, didn’t answer calls seeking comment. A Turk Telekom official, who asked not to be identified, declined to comment when contacted by Bloomberg yesterday.
“We would assess the corporate risk and we would make a judgment whether we’re getting compensated for it compared with where the sovereign is trading,” said Hussain, whose Mashreq Capital DIFC had $265 million in assets under management as of June, according to Moody’s Investors Service.

Extra Yield

Turkey is rated BB at Standard & Poor’s, the second-highest non-investment grade rating, and one level higher at both Moody’s and Fitch Ratings. The cost of insuring the country’s debt against default for five years plunged 139 basis points this year to 148 today, according to data compiled by Bloomberg.
The decline compares with a 20 basis point drop to 107 for Qatar, the Persian Gulf emirate rated nine levels higher at AA by S&P. The contracts pay the buyer face value in exchange for the underlying securities or cash, and falling prices signal improving investor perceptions of a borrower’s creditworthiness.
As a regular issuer in global emerging markets, Turkey “cannot be viewed with the same standard of judgment as other sukuk issuers in this region,” Hussain said.
The extra yield investors demand to hold Turkey’s dollar- denominated debt over U.S. Treasuries dropped 8 basis points to 216 as of 1:29 p.m. in Istanbul today, according to JPMorgan’s EMBI Global Index. The emerging-market average was 301.

Mideast Appetite

The lira climbed less than 0.1 percent to 1.7918 per dollar, while the yield on benchmark two-year bonds increased 3 basis points 7.57 percent. The extra yield investors demand to own Turkish notes rather than equivalent ruble debt was 83 basis points.
Turkish companies may benefit from a growing appetite among Middle East investors for Turkish assets and a drive by the government of Prime Minister Recep Tayyip Erdogan to strengthen trade with the Arab world as the country’s aspirations of joining the European Union fade.
Lebanon’s Bank Audi (BQAD) Sal-Audi Saradar Group obtained permission from Turkey’s banking regulator to operate in the country, according to a decree published in the Official Gazette yesterday. Bank Audi was also among a group of international banks that provided Dogus Holding AS of Turkey with a three-year $255 million loan last month.
“Middle Eastern investors have become more familiar with Turkish corporates in recent years,” Nick Stadtmiller, Dubai- based head of fixed-income research at Dubai-based Emirates NBD PJSC (EMIRATES), said by e-mail on Oct. 1. That “would help sell a Turkish corporate sukuk into the region,” he said.
(Bloomberg / 03 Oct 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic Development Bank to invest $1 billion to Kazakhstan in 2012-2014

Islamic Development Bank (IsDB) will invest $ 1 billion into the Kazakhstan’s economy in 2012-2014. Respective partnership strategy was signed October 2, 2012 in Astana, KazTag Agency reports.

“The new strategy enables to channel sizeable investments into transport, power industry infrastructure, agriculture, science, regional cooperation projects”, the country’s Minister of Industry and New Technology Asset Issekeshev said before the signing ceremony.

According to the ministry’s press-release, as of the beginning of October the Bank invested into the Kazakh economy a total of $987 million. Cooperation with the Bank dates back to November 30, 1995.

“Further cooperation with the Bank is of great interest to Kazakhstan. Kazakhstan was the first CIS nation to develop a partnership program with the Bank (…) the current industrial programs in Kazakhstan offer wide opportunities for bilateral cooperation”, President Nazarbayev said following his talks with the Bank’s President Ahmad Mohamed Ali Al-Madani.

“The partnership program will strengthen cooperation between Kazakhstan and the Bank and deepen interaction of Kazakhstan and Organization of Islamic Cooperation member states, notably in power industry and construction of motor and rail ways”, Ahmad Mohamed Ali Al-Madani said in his turn.

The Islamic Development Bank (IsDB) is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded in 1973 by the Finance Ministers at the first Organisation of the Islamic Conference (now called the Organisation of Islamic Cooperation).

The bank officially began its activities on 20 October 1975, inspired by King Faisal. There are 56 shareholding member states.

Use of the Tengrinews English materials must be accompanied by a hyperlink to

(Tengri News / 03 Oct 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook


Alfalah Consulting is NOT providing any kind of loan to finance project etc and asking for a fee. If you've received any email claiming to be from Alfalah Consulting, offering loan to you, please ignore it or inform us for further actions. Our official email is If you've received an email from, that's NOT from us. Be cautious!