Entries in English and Malay (Bahasa Melayu)

Thursday, 3 January 2013

Islamic banking industry still has much to achieve

LONDON – The global Islamic banking industry enters its 38th year in 2013 in its contemporary phase with invigorated optimism, fueled partly by its continued proliferation in new markets especially in Oman and Arab Spring countries and partly by the impressive momentum of the sukuk market which in 2012 by its own standards enjoyed a record year with several new entrants to the market, especially from non-traditional issuers, and pioneering new structures. 

But the industry has a tendency to be beguiled by its own relative success largely because of a lack of independent evaluation of its performance and policy and architectural development. To put the industry in perspective, Islamic banking assets account for less than 1 percent of global banking assets, thus any euphoria about it being a game changer for the global financial industry even in the wake of the subprime scandal of 2008 and the subsequent credit crunch, financial crisis and Eurozone sovereign debt crisis, should be treated with a healthy dose of skepticism. 

This time next year (2014) the industry should be judged from three key angles – policy, regional development, and market and product dynamics. 

The crucial challenge remains that of policy. Banking legal and regulatory policy is at best erratic and piecemeal because of the absence of an Islamic Bank Authorization Standard which can be applied universally complete with stand alone enabling regulatory and legal framework. Other policy challenges are accounting and financial reporting framework, Shariah Governance Framework, corporate governance, compliance and consumer protection provisions, and enforcement and recourse to law. 

Policies and frameworks of course will have national and regional variations but at the core they must have a universal application as conventional banking has under the Basle accord. 

Policy also inculcates a political acceptance of Islamic banking as an alternative system of financial intermediation and not as a religious phenomenon per se being exploited by extremists. It would be honest (and better) for a member country of the Islamic Development Bank (IDB) to be upfront and stress that it does not accept or believe in Islamic finance as a viable system of financial intermediation rather than feign an ambivalent, tepid, expedient and hypocritical approach to Islamic banking.

From a legislation point of view, once again all eyes will be centered on Kuala Lumpur as Malaysia formulates an upgraded legislation for Islamic banking and Takaful aimed at providing a conducive enabling environment for the next phase of development that will spur more risk-sharing transactions.

“This new law for the industry,” said Dr Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, the central bank, “is aimed at promoting certainty to the legal and regulatory treatment of Islamic financial transactions by providing legal recognition to the contractual requirements in accordance with the Shariah. This provides a comprehensive legal environment under which effective risk and profit sharing activities can take place, encompassing all aspects of Islamic financial transactions, from its prudential and business conduct requirements to the legal treatment of Islamic banking assets upon its resolution, to be fully consistent with the distinctive elements of the respective Shariah contracts employed in these transactions.”

From a regional point of view, the industry will continue to develop as it has in the past three decades, based on the policy developments, underlying economic fundamentals and regional political and economic cooperation mechanisms in place. 

While Gulf Cooperation Council (GCC) countries, especially Saudi Arabia and Qatar, and Southeast Asia led by Malaysia will continue to drive the Islamic banking market, this may be tempered by dampener effects on key economic fundamentals especially GDP growth rates, stability of key commodity prices including crude oil, natural gas, palm oil, and the level of foreign direct investment (FDI) inflows. This dampener effect may impact the development of Islamic banking elsewhere especially if it is partly dependent on equity, FDI and liquidity inflows from the GCC and Southeast Asia. 

The World Bank Group estimate for real GDP growth for the Middle East and North Africa (MENA) region is a worrisome average of only 0.5 percent for 2012 - the figure is the lowest of all the regional groupings of the developing countries and the high income countries. This is in contrast to 7.2 percent for East Asia, 6.3 percent for South Asia, and 4.8 percent for Sub-Saharan Africa. It is also way below the 1.3 percent estimate for the industrialized economies. This trend continues for the forecast for 2013 and 2014 when the MENA region economies are projected to grow at an annual average of 1.9 percent and 3.4 percent respectively – still way behind the above peer regions except the industrialized economies.

Similarly, the World Bank World Economic Outlook 2013 projects real GDP growth for MENA oil exporting countries in 2012 of 10.2 percent for Iraq; 6.3 percent for Kuwait and Qatar; and 6 percent for Saudi Arabia. The projections for 2013 decline sharply save that for Iraq which is expected to grow at a staggering14.7 percent, but Qatar is downgraded to 4.9 percent; 1.9 percent for Kuwait; and 4.2 percent for Saudi Arabia. 

One MENA country where Islamic Participation banking is expected to flourish even more is Turkey, which in 2012 issued its debut sovereign international ($1.5 billion) and domestic (TL1.6 billion) sukuk issuances. 

But even here there are important caveats. According to Ufuk Uyan, CEO of Kuveyt Turk Participation Bank, a subsidiary of Kuwait Finance House, who is also the Chairman of the Association of Participation Banks, the statutory Islamic banking industry body, “after the Turkish sovereign rating upgrade to an investment grade (Ba1 by Moody’s Investors Service) after some 12 years, 2013 shall bring a different and challenging environment for Turkish Participation banks. As you are aware from the experience of those markets after a ratings upgrade (and especially if a second rating company upgrade follows as expected in 2013 for Turkey), interest rates come down, and due to flow of significant portfolio money, exchange rates are under suppression. Therefore, a lot of intervention from the Central Bank of Turkey (CBT) is expected in the market via open market operations or unique instruments developed lately by the CBT.”

The main consequence of such a market environment for Participation banks is that there will be ample liquidity but rare financing options. As such, Uyan warns that Participation banks in 2013 have to develop new products to meet customer needs, especially sukuk. 

Market and product development challenges are not unique to Turkey but pervasive across the global industry. 

“We expect the Turkish Treasury to issue more TL sukuk in 2013. They have already announced their intention to issue a domestic sukuk in February 2013, but have not yet disclosed the amount and tenor. So, Participation banks with their high liquidity shall be investing again in Turkish Treasury Sukuk in 2013,” he explained. 

An encouraging sign is that Kuwait Turk expects to issue its debut domestic sukuk also in 2013. Thus far it has issued two sukuk in the international market. Turkish lira denominated sukuk, contends Uyan, will also enable Participation banks to develop alternative liquidity management tools to replace short-term Murabaha and Tawarruq and listed and traded on the Istanbul Stock Exchange and through Turkish Central Bank open market instruments. Elsewhere, Turkish participation banks which are major users of syndicated murabaha also plan to improve their export financing abilities with the launch of new products.

While most industry players project another bumper year for sukuk in 2013 for manifold reasons, they harbor several other wider expectations and concerns for the industry going forward. 

The global sukuk market, for instance, said Mohamad Safri Shahul Hamid, Deputy CEO of CIMB Islamic Bank of Malaysia, is anticipated to grow tremendously in 2013 because of interest from new markets, issuers tapping non-traditional market, the return of previous issuers, the emergence of non-traditional issuers from markets such as Saudi Arabia, the continuation of Malaysia as the leading sukuk hub globally, the increasing number of foreign corporates and governments choosing to sell their sukuk outside their home countries, spending established and mature markets, and the huge infrastructure spend in the MENA and ASEAN and East Asia regions. 

Other Islamic bankers such as Massoud Janekeh, Director and Head of Islamic Capital Markets at the Bank of London & the Middle East (BLME), said 2013 will be a continuing theme of 2012 highlighted by new entrants to the market especially in Africa and Central Asia, more debut sukuk issuances by new issuers and more sukuk with higher volumes to deal with refinancing. 

A pleasant surprise will be the emergence of a truly international Islamic bank and a UK debut sovereign sukuk issuance. To Janekeh, the potential for Islamic wealth and estate management is huge. “Islamic private banking needs more wealth management products to grow. In the current market of low yield fixed income returns, the opportunity for good performing Islamic funds is endless. Most Shariah-compliant income funds face the same problem of shortage of quality assets to invest. Sukuk issuance is recovering but still not meeting the fund management sector’s demands. There is scope for widening access to local currency issues with an appropriate [dollar] swap structure,” he noted. 

As far as murabaha and tawarruq continuing to dominate the Islamic finance landscape, Janekeh said “most Islamic banks prefer to use instruments such as murabaha/ tawarruq and ijara for their financing, and I cannot see that changing in the short term. Contracts such as musharaka and mudaraba do not fit in with general bank financing regulations in most tax regimes.”

Murabaha and tawarruq, on the other hand, according to CIMB Islamic’s Mohamad Safri Shahul Hamid, “allow jurisdictions which have yet to or while ‘developing’ their Islamic finance infrastructure, in particular to amend their existing legal, regulatory and tax frameworks to become more ‘accommodative’ with other Islamic structures, to have a ‘feel’ of the enormous potentials of Islamic finance. Secondly, it gives the opportunity to potential issuers that don’t possess any assets to issue sukuk by ‘utilizing’ Shariah-compliant assets from a third party.”

Syndicated murabaha will continue to have its following especially outside of Malaysia, ie in the Middle East, Turkey etc. In Malaysia, sukuk will continue to dominate. 

However, both market players and regulators are keen to see some movement of Islamic financing structures away from the traditional and dominating debt-based instruments to more participatory risk-sharing structures. 

Bank Negara Governor Dr Zeti in a recent speech warned that “while Islamic finance has all the ingredients and the potential to meet the needs of the global economy, the channeling of funds to productive activities in Islamic finance today is still largely being carried out through non-participatory contracts, that include the mark-up sale (murabaha) and the lease-based (ijarah) structures, which continue to remain essential to cater for financing trade and the purchase of assets.”

Such contracts, she added, are similar to lending instruments which expose the Islamic financial institutions mostly to credit risk elements. 

While non-risk-sharing contracts will continue to contribute to the future growth of Islamic finance, Dr Zeti contended that the wider use of risk-sharing transactions and undertakings under participatory finance models have significant scope in evolving a broader representation of Islamic financial products that will spur the next phase of industry growth and development. This includes participatory or equity-based contracts such as mudarabah and musharakah that support ventures involving entrepreneurship endeavors. 

“Greater use of equity-based models in Islamic financial solutions has been observed in the more recent period. This has been most evident in the sukuk segment, with Shariah structures evolving from predominantly Ijarah and murabaha structures to musharakah partnerships as well as convertible and exchangeable trusts,” she said. 

To most Islamic bankers, however, the main challenges for the Islamic finance industry in 2013 include: i) Islamic banking bracing itself for more competition; ii) The industry reducing costs. Treasury costs are still lower in conventional banks, and loan documentations are still cheaper; iii) Generating more short term assets. It is easier to match fund a 90-day trade finance deal than 5-year property financing. As such, the development of trade finance remains an untapped area of Islamic finance and one vital to its growth and competitiveness; and iv) Diversification. Exposure to the real estate sector remains the highest exposure for most Islamic banks. There is potential to diversify in other sectors such as transportation, energy and healthcare. 

(Saudi Gazette / 03 Jan 2013)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

KFH-Research: High potential for Islamic banking in Hong Kong

A report issued by KFH-Research highlighted high potential for Islamic banking in Hong Kong, because Hong Kong has high liquidity, free economy, strong presence of foreign banks, and simple taxes system, which makes it a great candidate to become a major Islamic financial hub.

Hong Kong is also considered to be a gate to China that has a robust market. In addition, Hong Kong held cooperation agreements with Dubai to reinforce cooperation in the field of promoting and developing sectors of Islamic banking, in order to take advantage of the liquidity in the GCC region. Hong Kong works on issuing a legislation that organizes Sukuk, so that it can attract more Sukuk issuance from neighboring countries, such as Malaysia that took many initiatives in Hong Kong for the past six years.
The Arab Chamber of Commerce and Industry (ARABCCI) was established in Hong Kong in 2006 as an organisation to promote commercial ties and greater economic and bilateral cooperation between Hong Kong/Greater China and the Arab World. The organisations provided a platform for trade links and increased business understanding. Its members include international corporations, as well as trade and commerce related government organisations.
Pursuant to the resolution by the ARABCCI in July 2008, the International Islamic Mediation & Arbitration Centre (IMAC) was set up in Hong Kong as an independent international institution in consultation with the International Chamber of Commerce. Its main objectives were to facilitate in conducting mediations and arbitrations, promotion of international commercial arbitration, coordinating the activities of, and offering assistance to existing arbitration institutions in the region.
Honk Kong Institute of Islamic Studies was also set up in 2008 with an aim to offer courses and training in the areas of in Arabic language, Shariah and Islamic finance. Amwal Credit Union was also formed to facilitate Shariah-compliant financial service offerings and to establish feasible joint venture partnerships with the members and organisations with similar goals.
In March 2008, Khazanah Nasional Berhad of Malaysia successfully issued USD550mln worth of Islamic exchangeable trust certificates on the HKEx. The sukuk which are exchangeable into shares of Parkson Retail Group were well received by the investors as the offering was 10 times oversubscribed despite the prevailing market conditions during the first half of 2008.
Hong Leong Bank and CIMB Group of Malaysia made humble beginnings in Islamic finance in Hong Kong by establishing Islamic banking windows (IBWs) in their Hong Kong branches in 2008 with the approval of the regulators, Bank Negara Malaysia (BNM) and HKMA. With the technical expertise in the field of Shariah, Malaysian banks have an edge over other jurisdictions to expand their presence and synergise their competencies in the region. The Banks' IBWs in Hong Kong currently offers Shariah-compliant wholesale and investment banking solutions. Liquidity management instruments are also offered based on Commodity Murabahah principle that facilitates Islamic money market transactions in Hong Kong.
In September 2012 Axiata group of Malaysia successfully launched a two-year RMB1bln sukuk in which Hong Kong investors took 55.0% of share. The sukuk was oversubscribed 3.5 times. Chinese offshore Renminbi denominated debt securities are commonly known as Dim-Sum Bonds.
In October 2012 Hong Kong's Noble Group issued a Malaysian ringgit denominated sukuk in its efforts to tap into the Islamic finance space in Malaysia. This three-year sukuk is priced at a profit rate of 4.50% and is structured on the principle of Murabahah.
Governmental Support and Initiatives
In November 2007, the Securities and Futures Commission (SFC) authorised the first retail Islamic fund called the Heng Seng Islamic Investment Series for sale in the Hong Kong market. The index fund tracks the Dow Jones Islamic Market China/Hong Kong Titans Index (DJMCHK). As at end-October 2012, the total market capitalisation of the DJMCHK was USD701.3bln. As at 20 November 2012, there are 400 Shariah-compliant securities with a market capitalisation of USD398.42bln. There are also two Islamic funds in Hong Kong (as at end-2011) with AuM (assets under management) worth USD29.7mln.
The Dow Jones Islamic Market China/Hong Kong Index (DJICHK) has shown an increase since the global financial crisis. In November 2012 it gained 137.8bps from the last year during the same month, closing at 1,614.6bps Dow Jones Islamic China Offshore Index (DJICHOF) touched 3,886.78bps in April 2011 up from the lowest 928.41 in August 2008 before closing at 2820.7 as at end-October 2012.
In support of the Hong Kong government's initiative to develop Islamic finance, Hong Kong's SFC entered into a Memorandum of Understanding (MoU) with the Dubai Financial Services Authority (DFSA). The MoU aims at mutual cooperation on capacity building and human capital development in Islamic finance, as well as promotion and development of their respective Islamic capital market segments. This has led to increased synergies in facilitating cross-border marketing and distribution of Islamic funds.
Hong Kong being an important access point to the PRC has a strong influence on the PRC's economic dynamics and vice-versa. With the encouragement of the China Banking Regulatory Commission (CBRC) in 2009, the Ningxia Hui Autonomous Region took the initiative in pioneering Islamic finance in the PRC. This development was meant to cater to the financial needs of the about 2.2 million Muslims in Ningxia province which is approximately 10.0% of the PRC's total Muslim population. Hong Kong's gradual and full-fledged entry into Islamic finance may provide much needed impetus to the CBRC's ambitions in the Ningxia Hui region and also to the larger Muslim population of PRC.
The HKMA is an Associate member of Islamic Financial Services Board (IFSB). HKMA has hosted workshops conducted by IFSB on capital adequacy standards for Islamic financial institutions, capital adequacy requirements for sukuk, securitisations and real estate investments.
The Hong Kong Financial Services and Treasury Bureau (FSTB) initiated public consultations for Islamic bond proposition earlier this year and concluded the same in the month May. It further indicated that the government is in the process of finalising the amendments to its Internal Revenue Ordinance and Stamp Duty Ordinance to facilitate sukuk issuances in the administrative region. Subsequently the bill will be tabled in the next legislative session in early 2013 in the Legislative Council.
The amendments seek to draw level playing field for sukuk profits tax, property tax and stamp duty liabilities. Especially, a new term would be introduced which would be known as alternative bond scheme and will have bond arrangement and investment arrangement. While the former refers to the bond issuer and the bondholders, the later refers to the bond-issuer and the originator.
In each of these arrangements a set of essential features and qualifying conditions need to be fulfilled in order to avail the tax and other stamp duty deductions and exemptions. The government of Hong Kong will ensure that sukuk will have similar legal, tax and regulatory outlays as that of bonds.
Hong Kong has gathered significant amount of momentum in the field of Islamic finance in the last four to five years. It would have exploited the market by now had it not been effected by the global financial crisis and formulated enabling laws and regulations for Islamic product offerings.
Hong Kong being among the world's top export-import destinations there is a huge potential in the areas of Islamic trade finance.
With immense liquidity in the Middle-East region, Hong Kong will be able to tap into the Middle East market with Islamic propositions and open up channels to a larger investor base for capital market products such as sukuk.
A developed securities market in Hong Kong will be able to synergise its strengths with the south-east Asian markets where Islamic finance has seen much growth and development in the past few decades.
Islamic wealth management and Islamic private equity will find a flourishing market in Hong Kong's developed market with existing robust legal and regulatory environment.
Hong Kong may provide a window to access large Muslim customer base in mainland China to market various Shariah-compliant financial products and services.
Islamic microfinance institutions have a greater opportunity to complement and tap Hong Kong's newly formulated microfinance schemes.
As of now, initiations were concluded to accommodate a limited number of capital market products. The scope of an all-round introduction of Islamic financial products may take more time and effort, both from the market players and the regulators' perspective, requiring more amendments in terms of financial services laws and regulations.
Friendly and tax neutral regimes for the treatment of Islamic finance products will be needed that does not unfairly penalise them for the structure and techniques they employ. Amendments may be required to facilitate other Shariah-compliant commercial and retail products to compete in the market. In addition to sukuk, Shariah-compliant risk and liquidity management products would be needed with for better mobilisation and management of Islamic funds.
A recurring challenge in the Islamic finance industry has been the lack of skilled Islamic finance professionals. Individuals who are able to understand the dynamics of the modern financial product offerings together with their Shariah implications will be required for a smooth and uninterrupted growth of the industry. 

(Zawya / 02 Jan 2013)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Bank Nizwa signs MoU for Islamic financial services

MUSCAT -- Bank Nizwa , the first Islamic bank in the Sultanate of Oman, recently signed a Memorandum of Understanding (MoU) with Capitas Group International (CGI), a leading management firm specialising in Sharia compliant finance. Under the MoU, both firms will collaborate to create specialised financial platforms in the Sultanate by tapping into their combined skills and resources, brought forth by the alliance.
CGI is a Jeddah-based company formed in partnership with the Islamic Development Bank's private sector arm, the Islamic Corporation for Development of the Private Sector (ICD). The company establishes financial services businesses to fill the unmet demand for Shari'a compliant finance in OIC member countries.

Commenting on the MoU, Dr Jamil el Jaroudi, CEO of Bank Nizwa said, "The MoU with CGI is in line with Bank Nizwa 's efforts to elevate the financial services industry in Oman. Through this strategic partnership we will jointly develop, launch and manage financial platforms and thus promote Islamic Banking and Shari'a compliant products that benefit the customers.

"With the recent Royal Decree in place Islamic finance is now a bonafide component of the Sultanate's financial infrastructure. The strength of CGI is based on the expertise of its management team which has extensive experience in Sharia compliant finance. This strength is a critical component for the development of Islamic finance at this early stage in Oman."

In the MoU, Bank Nizwa and CGI have laid down key primary goals, namely to launch a mono-line mortgage finance company and to create a housing development finance programme. "As the first Islamic Bank in Oman, Bank Nizwa is uniquely positioned to act on our main goals under the MoU. Working with the Bank's trained staff and leveraging its sophisticated processes, CGI looks forward to deploying its expertise and assisting in the overall development of the Islamic finance sector in Oman. This includes leveraging the relationship with our partners, ICD," stated Naveed Siddiqui, CEO of CGI.

Bank Nizwa is committed to serve the people of Oman by applying fair practices as laid down by the Sharia and by creating job opportunities. The signing of the MoU is aimed at the organic growth of the financial sector in the Sultanate. Bank Nizwa has a pool of knowledgeable and well-trained staff and its world-class software and internal systems are directed towards benefiting the valued customers. Hence the strategic alliance in consultation with each other will explore opportunities in the business sectors mentioned above and will assess their viability in the Sultanate of Oman.

The MoU is a reflection of Bank Nizwa 's efforts to provide quality financial services and comes at an opportune time as Bank Nizwa prepares for its opening.

The bank is in a state of readiness and will open its doors and offer Islamic banking products and solutions to the Sultanate by the beginning of 2013.

Having received the banking license from the Central Bank of Oman the Bank is currently undertaking a comprehensive internal test of its systems and processes, as a precursor to the public launch.

In addition to its work in Oman, CGI is active in several other OIC markets including Saudi Arabia, Morocco, and Tunisia. The Company's senior managers are experts in the field of real estate finance who have established leading Shari'a compliant financial services companies in the United States and Dubai and are now launching a national home finance company in Saudi Arabia. CGI has also held a key role in the structuring and setup of a SAR 1 billion SME Fund which is being sponsored by ICD and the Islamic Development Bank.

(Zawya / 30 Dec 2012)

Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Sukuk Trail Emerging-Market Debt on Yield Hunt

Islamic bonds trailed emerging-market debt for a second year as foreign funds chased higher yields, a trend that Union Investment Privatfonds says is likely to continue in 2013.
Global Shariah-compliant notes gained 9.6 percent in 2012, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index, compared with 18.5 percent for developing-nation securities, JPMorgan Chase & Co.’s EMBI Global Composite Index shows. The average yield on dollar sukuk dropped 1.18 percentage points to 2.81 percent, while that for emerging-market paper fell 1.58 percentage points to 4.50 percent, according to the two gauges.
Developing-nation bond funds extended their inflow streak to 28 weeks in the period ending Dec. 21, according to researcher EPFR Global, fueled by monetary easing in the U.S., Japan and the euro area. Debt from investment-grade Malaysia, which accounts for 62 percent of outstanding sukuk, returned 11 percent last year, compared with 19 percent for Russia and 17 percent for Peru, according to JPMorgan indexes.
“This year can be characterized as the hunt-for-yield year,” Sergey Dergachev, a Frankfurt-based senior portfolio manager at Union Investment Privatfonds, which oversees $8.5 billion of emerging-market debt, said in a Dec. 27 interview. “The chance to see this trend continue, where everything that has yield on it performs well, is very good.”

Higher Sales

Sukuk returns trailed developing-nation bonds by just 1.3 percentage points in 2011, after beating them by 0.8 percentage point the year before, the HSBC/Nasdaq and JPMorgan gauges show.
The average yield on global Islamic notes reached a record low of 2.76 percent on Nov. 30, according to the HSBC/Nasdaq index. The gap between the average yield and the London interbank offered rate, or Libor, shrunk 91 basis points, or 0.92 percentage point, to 182 basis points in 2012.
Falling yields have helped push worldwide sales of debt that comply with Islam’s ban on interest to an unprecedented $46.3 billion in 2012, surpassing last year’s record of $36.7 billion, data compiled by Bloomberg show. Sales may be even higher in 2013 as new countries including Oman, Tunisia and Egypt tap the Shariah-compliant capital market for the first time, CIMB Group Holdings Bhd. (CIMB) and OCBC Al-Amin Bank Bhd. said in December.
Foreign funds boosted their holdings of Malaysian government securities by 29 percent to a record 221.9 billion ringgit ($73 billion) last year through October, according to the central bank. Overseas investors increased ownership of Indonesian sovereign bonds by 21 percent to 270.5 trillion rupiah ($27.8 billion) in 2012, finance ministry figures show.

Stabilizing Yields

The inflows helped push the yield on Malaysia’ 3.928 percent sukuk due June 2015 down by 1.38 percentage points in 2012 to 1.28 percent, while that for Indonesia’s 8.8 percent Islamic dollar note due April 2014 fell 135 basis points to 1.91 percent, according to data compiled by Bloomberg.
“Stimulus isn’t going to play as big of a role in 2013,” said Tan Chee Wee, the Kuala Lumpur-based head of fixed-income research at Maybank Investment Bank Bhd., the third-largest underwriter of Islamic bonds. “We have already seen a lot of foreign inflows come into Malaysia,” he said in a Dec. 27 interview, adding that he didn’t expect yields to fall much further this year.
The premium investors demand to hold sukuk issued by Dubai over Malaysia’s investment-grade Islamic bonds narrowed to a record low of 75 basis points on Dec. 27, data compiled by Bloomberg show. The yield on the emirate’s securities, which are not rated by any of the three major companies, dropped 3.44 percentage points in 2012 to 2.13 percent.

Qatar, Bahrain

The yield on the 2.099 percent Shariah-complaint notes from Qatar, another major issuer of Islamic debt, declined 12 basis points to 1.98 percent since they were issued in July, data compiled by Bloomberg show. The yield on Bahrain’s 6.247 percent Islamic securities due June 2014 reached a record-low of 1.77 percent on Dec. 31 and fell 148 basis points in 2012.
“The sovereign universe for sukuk investors consists primarily of stable but also lower-yielding countries, which have certainly lagged the performance of higher-yielding countries in 2012,” said Union Investment’s Dergachev. “The higher-yielding the credit was, the better it has performed.

(Bloomberg / 02 Jan 2013)

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!