Sukuk sales unlikely to match 2012 record

GLOBAL Islamic bond sales look set to miss out on a record year after Malaysia’s sovereign wealth fund postponed what would have been this year’s biggest offering. The top underwriter is also cautious over the coming year.

Issuance to date is US$2.1 billion (RM7.3 billion) shy of the unprecedented US$46.8 billion in 2012 and more than last year’s US$43.1 billion total, data compiled by Bloomberg show.

1Malaysia Development Bhd (1MDB) on Monday put off a plan to sell the equivalent of US$2.4 billion of sukuk until the first half of next year, said two people with knowledge of the deal.

CIMB Group Holdings Bhd, this year’s leading Islamic debt arranger, predicts that it will be a challenge for sales to test new highs next year as the slump in crude oil prices may deter issuance. Much will depend on first-time entrants coming to the market after debut offerings from the United Kingdom, Luxembourg and Hong Kong this year, according to AmInvestment Bank Bhd.

“Sukuk sales this year are unlikely to surpass 2012’s levels,” Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd here, said by phone on Monday. “While we could still see strong interest from issuers to tap the sukuk market next year, sentiment has turned cautious because of the volatility in oil prices.”

Global issuance of sukuk is set for the worst quarter since the three months ended June 2013, with sales so far of US$7.8 billion. In the six-member Gulf Cooperation Council, which relies on oil revenues, offerings climbed to US$2.4 billion from last quarter’s US$750 million, even as Brent crude tumbled 43 per cent from its June high.

CIMB’s Badlisyah said it may take another six months for oil prices to stabilise and issuers in the Middle East may have to sell Islamic debt to raise funds. Malaysia, which is also a net exporter of the fuel, may see support for sukuk as the government undertakes projects linked to its US$444 billion development programme, he said.

1MDB is postponing the sukuk as it seeks a six-month extension from the nation’s energy commission to build a coal-fired plant south of the capital, said one of the people familiar with the matter.

Bond issuance will likely taper off now as bankers and investors go on their year-end holidays, said Badlisyah.

Borrowers will face the prospect of higher interest rates next year as the United States Federal Reserve starts raising its benchmark rate for the first time since 2006.

(Bloomberg / 09 December 2014)

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

Islamic banking in PDP’s manifesto

After Peoples Democratic Party released its manifesto, I directly went to their website to download their ‘aspirational agenda’. By definition ‘manifesto’ is a document of aim and plan which gives hints about how a party views politics.

Though I will not discuss the whole document of fifty-eight pages, I will straight go to page thirteen (titled ‘diversifying personal finance options’). It was an awesome moment to grasp that one of the leading political party of J&K sees the role of non-banking financial companies can play in restructuring our economy by way of offering nationally accepted products which are sharia complaint-an important step towards developing sharia-complaint finance in the state.

Islamic banks in India do not function under banking regulations act; therefore we cannot have a full-fledged Islamic banking system. They are licensed under non-banking finance companies hence we can start some of the options by way of setting NBFCs. In 2013 RBI allowed a firm in Kerala to operate as a NBFC that follows Islamic principles known as Al Barakah financial services. Though being a matter of fact that unless and until full-fledged Islamic banks are permitted, an Islamic finance sector will find it hard to develop. But still we can hope that the initiative will pave its way towards the main area of focus.

The participation of sharia complaint NBFCs in J&Ks banking system will lead to further infrastructural development in state. In today’s world Islamic banking is gaining more importance in different parts of the world. If Islamic banking is opened in J&K it would benefit the state, as that money which is still lying in the banks, if invested in the Islamic bank would improve the economic conditions of the people. An interest free banking would help to improve the education and would help in more employment.

It should be well kept in mind that Islamic bank is not related to Muslims only it is related to all as the main focus of it is on social well-being and wealth generation activities in the society. The system of conventional banking which leads to debt crises, poor becomes poorer and the rich richer, inflation becomes rampant and the education turns out to be expensive, is equally criminal to all faiths.

There is also no doubt that no political party has converted 100% of their manifesto into reality. And in Kashmir the analysis of previous political manifestoes in terms of fulfilling them can even be ranked below average. Now it will be a test for the PDP, if coming to power will they match their ‘walk with talk’ in terms of setting of NBFCs based on sharia? But I personally welcome them for assigning one page in their manifesto for this people friendly initiative. And I hope if coming to power they will start their office with this work.

(Kashmir Reader / 11 December 2014)

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