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Tuesday, 10 June 2014

Meethaq, pioneer of Islamic banking in Oman signs MoU with Al Salam Bank, BMI Bank of Bahrain

Muscat: Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, Al Salam Bank Bahrain, and Bahraini retail and commercial banking institution BMI Bank, have signed an memorandum of understanding (MoU) to collectively pool expertise, technologies and resources. 

They have agreed to work together across a range of Islamic banking activities including Islamic syndications, particularly those issued in Oman, treasury transactions, liquidity management products and Islamic trade finance transactions.

The MoU was signed at BMI Bank's headquarters by Sulaiman Al Harthy, group general manager, Meethaq Islamic Banking; Yousif Taqi, CEO of Al Salam Bank; and Jamal Al Hazeem, CEO of BMI Bank, said a press release.

"Meethaq is delighted to sign the MoU with Al Salam Bank and BMI Bank, and we will work together to offer various Islamic finance products covering treasury, trade finance and capital market in Oman. 
Meethaq is working to strengthen its operations in the Sultanate, which is witnessing substantial growth in the Islamic banking industry. We consider our partnership with Al Salam Bank and BMI Bank a great advantage to maximise favourable opportunities, and thereby expand our coverage," said Al Harthy.

"Since its inception in 2013, Meethaq has emerged as a leading Islamic banking service provider in Oman, and has enhanced its reputation within the region through investments in staff, systems and controls besides the timely launch of several world-class Shari-based products and services. Our organisations share mutual principles, values and expertise, and we are therefore pleased to sign this MoU. We look forward to enhancing this partnership in the coming years," added Al Hazeem. 

(Times Of Oman / 08 June 2014)
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Japan Lacking Sukuk Rules Spurs Malaysia Debuts

Bank of Tokyo-Mitsubishi UFJ is planning a debut sukuk in Malaysia as Japan’s lack of Islamic finance rules forces companies overseas to tap Muslim investors.
Bank of Tokyo-Mitsubishi UFJ (Malaysia) Bhd., a member of the financial group that’s part of Japan’s biggest lender by market value, has set up a $500 million multi-currency program to sell debt complying with Koranic principles and is also considering offering the world’s first yen-denominated sukuk, according to a June 5 statement. The issuance will help manage the bank’s increasing Islamic financing needs, it said.
The lender joins Japan Bank for International Cooperation and the North Asian nation’s Aeon Credit Service (M) Bhd. in choosing Malaysia to sell Islamic bonds, taking advantage of Shariah-compliant banking assets that are set to double to $3.4 trillion worldwide by 2018. The 2.83 percent average yield on dollar sukuk globally is near a one-year low, while conventional emerging-market U.S. currency notes are paying 5.26 percent, according to Deutsche Bank AG and JPMorgan Chase & Co. indexes.
“The experience of Bank of Tokyo-Mitsubishi will be useful for other Japanese institutions to copy,” Raj Mohamad, managing director at Five Pillars Pte, a consulting firm in Singapore, said in an e-mail interview yesterday. “The awareness of Shariah products will improve and slowly it will give investors the opportunity to tap Japanese corporates.”

JBIC Offer

While Japan has no Islamic banking rules of its own, the government amended legislation in 2008 to allow subsidiaries of the country’s lenders and insurers overseas to provide financial services in accordance with religious tenets. Bank of Tokyo-Mitsubishi UFJ Malaysia offers Shariah-compliant loans and guarantees among its products in the Southeast Asian nation.
Japan Bank for International Cooperation, a state-owned lender, announced in April that it was considering selling its first Islamic bonds this year to fund a project in Malaysia. Aeon Credit Service (ACSM), the local unit of a Japanese consumer finance provider, said in December it was planning to sell sukuk with no set maturity, adding to previous offerings.
Average yields on global dollar sukuk have dropped 59 basis points, or 0.59 percentage point, in 2014 and reached a one-year low of 2.78 percent on May 29, the Deutsche Bank index shows. That compares with an 84 basis point decline in the JPMorgan gauge of developing-market debt.

Khazanah Cancels

Japanese banks are selling Islamic bonds to tap Shariah-compliant funds in Malaysia, Indonesia and the Middle East, said Mohamad at Five Pillars. A yen issue would attract interest from investors seeking securities with good ratings and an offering such as this would help boost secondary-market trading in the current buy-and-hold environment, he added.
While global yields have dropped this year, the FTSE Bursa Malaysia KLCI index of shares fell 0.2 percent. Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. abandoned a plan last week to sell exchangeable dollar sukuk because pricing didn’t meet expectations, said a person with knowledge of the deal who asked not to be identified as the details are private.
Khazanah sold Singapore dollar-denominated convertible Islamic bonds in October via the special purpose company Indah Capital. It issued S$600 million ($480 million) of five-year debt at a minus 0.25 percent yield and carrying a 17 percent exchange premium, according to a company statement. The notes yielded minus 0.96 percent yesterday, according to data compiled by Bloomberg.

‘Hard Time’

Bank of Tokyo-Mitsubishi’s sukuk plan comes amid speculation borrowing costs will soon increase with the Federal Reserve (FDTR) on track to end its bond-buying program by year-end and start raising interest rates in 2015. The debt has been rated AAA by Malaysia’s RAM Rating Services Bhd., the highest investment grade.
“While demand for sukuk is still good, issuers who expect to get last year’s pricing for their bonds will be in for a hard time,” Azdini Nor Azman, the Kuala Lumpur-based head of treasury at Bank Muamalat Malaysia Bhd., said in a June 5 phone interview. “Issuers will have to stomach higher borrowing costs as yields are unlikely to fall from current levels.”
Nomura Holdings Inc. tapped the Malaysian Islamic bond market in 2010 and the notes have since matured. Toyota Motor Corp. sold 280 million ringgit ($88 million) of sukuk in 2012 in two offers via its unit Toyota Capital Malaysia Sdn. The 4 percent securities due in May 2015 aren’t actively traded and last yielded 3.58 percent on April 15, stock exchange data show.

‘Widely Accepted’

Global issuance of bonds that pay returns on assets to comply with Islam’s ban on interest rose 6.5 percent to $20 billion in 2014 from a year earlier, after reaching $43.1 billion last year and a record $46.5 billion in 2012, according to data compiled by Bloomberg.
The Bloomberg-Malaysia Sukuk Ex-MYR Index, which tracks global corporate and sovereign notes from Asia and the Middle East, gained 3.4 percent this year to 116.44, after rising 0.8 percent in 2013. It climbed to a record 116.47 on June 2.
“Islamic investment instruments are currently widely accepted even by conventional investors,” Abas A. Jalil, chief executive officer at Amanah Capital Group Ltd., a consultancy in Kuala Lumpur, said in an e-mail interview yesterday. “More Islamic institutions will start to understand the Japanese market better, and definitely it will start drawing more interest from both issuers and investors.”
(Bloomberg / 10 June 2014)
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