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Tuesday, 1 March 2016

Hong Kong Closes on Indonesia in Dollar Sukuk as Silk Road Alive

Hong Kong’s possible third Islamic global bond in three years brings it closer to Indonesia and Malaysia in terms of sovereign sukuk presence, a boost to the market that coincides with China’s Silk Road revival.
The finance center has already raised $2 billion from sales in 2014 and 2015, which attracted $6.7 billion in total orders, while Indonesia plans to tap investors for the sixth year running and Malaysia is returning for its seventh offering. While the city only has 270,000 people following the teachings of the Koran, it’s positioning itself as a vital port and financing hub for China’s ‘One Belt One Road’ policy announced by President Xi Jinping in 2013.
“The announcement is a great sign of Hong Kong’s continued wish to be at the center of people’s minds when it comes to Islamic financing in Asia, particularly as momentum builds around China’s belt and road initiative,” said Davide Barzilai, Hong Kong-based head of Islamic Finance for Asia Pacific at law firm Norton Rose Fulbright. "We will find that Islamic-compliant investors will see the attractions.”
Hong Kong, which is losing its role as a gateway to China as Shanghai’s financial market opens, is keen to become the launchpad for the global ambitions of Chinese companies, including building roads, railways and ports along the traditional Silk Road to the Middle East, Africa and Europe. While the ex-British colony is making progress after putting in legislation for Shariah-compliant bonds in 2013, Singapore’s aspirations are stalling, highlighting the difficulties posed to countries or cities with small Muslim communities.
The city is considering selling a third sukuk, Financial Secretary John Tsang said in budget comments, brightening the outlook after a 29 percent slump in global issuance in 2015 from $49.6 billion the previous year, when the U.K., Luxembourg and Hong Kong sold such debt for the first time.

2016 is off to a better start, with $5 billion in worldwide sales compared with $1.8 billion a year earlier, data compiled by Bloomberg show. Kenya, Nigeria, Ghana and Morocco are also planning debuts. Offerings climbed to a record $51.6 billion in 2012.
Singapore’s DBS Group Holdings Ltd. closed its Islamic unit last year and despite introducing laws for Shariah-compliant bonds in 2006, sales have so far been limited to energy company Swiber Holdings Ltd., Sabana Shariah-Compliant Industrial REIT, the central bank and home builder City Developments Ltd.
In a sign the ancient Silk Road is coming back to life, the first cargo train from China to Iran completed its journey in February following the lifting of international economic sanctions. President Xi toured Saudi Arabia, Egypt and Iran in January to discuss energy cooperation, industrial parks and diversifying trade. To fund its global push, China is setting up the Asian Infrastructure Investment Bank, pushing for the yuan to be included in global reserves and opening its bond market to foreign investors.
China’s road policy offers opportunities for Islamic financing and sukuk, said Barzilai at Norton Rose Fulbright. While Hong Kong is in a strategic position to access China’s large Muslim population, it needs stronger efforts to harness investor demand and improve liquidity, said Angus Salim Amran, the Kuala Lumpur-based head of markets at RHB Investment Bank Bhd., Malaysia’s second-biggest Islamic bond arranger.
“There is no doubt that Hong Kong is positioning itself as the gateway to China as currently sukuk investors have limited opportunities to tap into China’s potential,” said Johar Amat, head of Treasury at OCBC Al-Amin Bank Bhd., the Shariah-compliant unit of Singapore’s second-largest lender. “The diversity in demand for sukuk as a financing instrument is crucial for the growth of Islamic finance worldwide.

(Breaking News / 01 March 2016)
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IRTI, CIBAFI in deal to set up Islamic finance data repository

The Islamic Research and Training Institute (IRTI), a member of the Islamic Development Bank Group, and the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, have signed a deal for a joint project to establish the first-of-its kind Islamic financial industry data repository.
The online repository, to be named the ‘Islamic Financial Industry Intelligence (IFII)’, is aimed to be a one-stop shop for comprehensive and reliable Islamic financial and non-financial data and information, said a statement.
The memorandum of understanding (MoU) was signed at the IDB Group headquarters in Jeddah by professor Mohamed Azmi Omar, IRTI director general and Abdelilah Belatik, CIBAFI secretary general.
IFII would comprise several integrated databases covering all the components of the Islamic finance industry—including banking, insurance, and social finance. In the first phase, the system will take off with a database of Islamic banking information.
IRTI and CIBAFI resolved to co-operate on this project in order to fill a vacuum created by the absence of co-located timely, reliable and comprehensive data on all aspects of Islamic finance.
IFII is expected to be a vital resource for Islamic financial institutions, policymakers, regulatory authorities, industry professionals, academics, scholars, and other stakeholders. IFII will come with state-of-the-art built-in features to allow for report generation, data visualization, and download of financial datasets.
“This repository would make it easy for industry operators to get credible information to do their businesses; while academics and students would easily get the information they need to produce high-quality research in their efforts of advancing knowledge in Islamic economics, banking and finance,” said Omar.

“The partnership with IRTI will strengthen CIBAFI’s role as the ‘voice’ of the industry and advocate for the Islamic financial services industry with other international organizations, international standard-setting organizations and regulatory and supervisory authorities, as well as support its strategic objectives. IFII would be of immense benefit to CIBAFI and its members as well as industry stakeholders at large,” Belatik added.

(Trade Arabia / 01 March 2016)
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