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Thursday, 7 May 2015

Malaysian sukuk sales rise 24% to $3.1 billion

Issuance of sukuk in April was 24% higher than in March, at 11 billion ringit (US$3.1 billion), Customs Today said, quoting data from the Bloomberg AIBIM Bursa Malaysia Corporate Sukuk Index.
Sovereign wealth fund Khazanah Nasional accounted for 2bn ringgit and DanaInfra Nasional, a state-owned company that funds subway construction, raised 3.5bn ringgit, the report said.
The Malaysian government received bids for six times the value of the $1.5bn dollar-denominated sukuk it offered last month.
"There’s a lot more confidence among issuers after the government’s sukuk sale last week," Mohd Effendi Abdullah, head of Islamic markets at AmInvestment Bank told Customs Today. "Discussions on financing of big infrastructure projects are currently underway."
AmInvestment Bank, Malaysia's third-biggest arranger of Islamic notes, has estimated that sukuk sales will pass last year's 66.1bn ringgit as development projects move ahead, Customs Today reported.
"The hike in sukuk sales in Malaysia reflects an increase in Islamic liquidity as well as immense investor confidence in the long-term financial and political health of the country," said Islamic finance expert Umbreen Meenai of Pinsent Masons, the law firm behind
"Malaysia has traditionally been the world’s biggest sukuk market. The Ringgit is faring much better on the international markets and against the US dollar, following rumours that the Federal Reserve would raise interest rates soon. As Malaysia is the only net oil exporter among Asia’s major economies, a rebound in the price of Brent crude following a slump in the last three quarters may also be an important factor. The success of the sovereign issuance shows that Malaysia remains unaffected by Fitch Ratings’ threat to downgrade the country’s credit rating," Meenai said.
In January the Dubai-based AlHuda Centre of Islamic Banking and Economics predicted that Islamic banking and finance will exceed $2.5 trillion of assets in 2015 as the industry moves into new markets.
In October, the governor of Malaysia's central bank, Bank Negara Malaysia,said the $270bn global market for sukuk could become an "important source of funding" for infrastructure and other long-term projects.
(Out-Law.Com / 06 May 2015)
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Rebranding Islamic banking

The great theoretical appeal of Islamic finance is that it need not be sold only to Muslims. So, as the industry looks for direction after 20 years of growth and consolidation, perhaps the best engine for its future growth is for it to align itself more with the sustainable and ethical investment camp. On the banking side, this is already happening. Tirad Al Mahmoud, CEO of Abu Dhabi Islamic Bank, says that while its core customer base is still predominantly Muslim, ADIB is seeing more non-Muslim expatriates opting for Islamic banking services. He believes that, marketed properly to a customer base that is demanding more ethical products and morally sound business models, global demand for Shariah-compliant banks and services will eventually outpace that of conventional banks. But perhaps for that, there’s a branding exercise that needs to happen, one that starts with ignoring the Islamic bit. An interesting take on this theme can be seen with the fund manager Arabesque – a Shariah-based firm whose marketing materials never refer to Shariah or Islamic finance. (In fact, even the 'Arab’ bit is a red herring: Arabesque is a form of art-based geometry, a thematic pattern, and has nothing to do with the Arab world.) Aim or consequence It is pitched instead as a quant fund that combines socially responsible environmental, social and governance information with other fundamental considerations, with the principle that ethical investment does not exclude performance but actively generates it. In this methodology, things that are excluded by Shariah – the obvious things like armaments and alcohol, but also companies with a high level of debt – are removed by default anyway. So is its Shariah compliance an aim of the strategy, or an indirect consequence of it? "We are trying to be a global quant equity fund that uses ESG information to enhance the portfolio and drive outperformance," says Omar Selim, CEO of Arabesque. "The result is: yes, it has 100% Shariah compliance," but only insofar as the best risk/return outcome the manager can see happens to be Shariah compliant. He describes it as "the Prêt à Manger of asset management: a healthy meal that tastes good". As the features in this edition demonstrate, Islamic finance has grown dramatically in both asset size and sophistication. But as the industry takes stock and considers where to go next – whether growth is the priority, or a refocusing on product development towards structures that truly mesh with the principles of Islamic finance – it could do worse than market itself as a way of banking that is less about faith than about sustainable and ethical practice.

(Euromoney / 06 May 2015)
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