Prime Minister Najib Razak’s plan to revive Malaysia’s faltering economy is getting no help from the country’s Islamic bond market.
Yields on government 10-year sukuk, used by companies to gauge the cost of Shariah-compliant financing, are at their highest level in 18 months relative to two-year securities, according to data compiled by Bloomberg. And with the slide in Brent crude prices sapping Malaysia’s oil-export revenue against a backdrop of looming U.S. interest-rate increases, investors say longer-term borrowing won’t be getting cheaper anytime soon.
“With the U.S. expected to raise interest rates soon, Malaysia’s yield curve will remain steep next year,” said Elsie Tham, a senior fund manager at Kuala Lumpur-based Manulife Asset Management Services Bhd who oversees more than US$1 billion. “Companies will find it challenging to raise funds because of slower economic growth.”
The Palestinian central bank is attracting local banks to its first sale of Islamic bills.
Palestine Islamic Bank will submit a bid for as much as $10 million, and Arab Islamic Bank said it probably will participate.
Palestinian Authority Prime Minister Salam Fayyad is seeking to expand Islamic finance to reduce reliance on aid from the U.S., Europe, Saudi Arabia and others as the territory starts building institutions for a future state.