#Malaysia’s securities regulator has proposed establishing a fund to invest in the country’s Islamic finance funds and make them more attractive to institutional and foreign investors. The proposed fund is part of an Islamic fund and wealth management blueprint launched on Thursday. It would invest in multi-currency Islamic investment products managed by Malaysian-based asset managers. The fund could address challenges that Islamic funds have faced so far. Few Malaysian-managed funds are offered overseas but this is starting to change. CIMB Islamic Asset Management, for example, this week launched an Ireland-domiciled dollar-denominated sukuk fund. The Employees Provident Fund is launching a RM111.45 billion shariah-compliant retirement fund this month, which could serve as a boon to asset managers in the field.
The Wall Street Journal (WSJ), in continuing to pursue the story on the 1MDB controversy, has reported that there’s unprecedented attention on a number of Swiss banks and Zurich-based Falcon Private Bank AG, a small wealth manager snapped up by an Abu Dhabi investor during the financial crisis. The Swiss authorities, according to WSJ, are probing suspected money laundering and possible corruption of “foreign officials”. The investigations have landed Falcon in the middle of the controversy around 1MDB. Falcon, which so far hasn’t been accused of any wrongdoing, said the bank was legally barred from answering questions about its clients.
Bank Negara said it would finalise operating standards for all major Islamic finance contracts by the end of this year, creating the first comprehensive set of practical guidance for the industry. The set of 11 standards will complement existing sharia guidelines issued by Bank Negara, as the regulator aims to address inconsistencies in the use of Islamic contracts. Malaysia’s current sharia standards are enforceable and have been in place for years, but they are technical rather than practical and still open to interpretation, Mohamad Akram Laldin, deputy chairman of the sharia advisory council of Bank Negara said. The new standards could help regulators in other countries that are seeking day-to-day guidance for their own markets, said Laldin.
Malaysia Building Society Bhd (MBSB) has not initiated any new merger discussions with any organisation after the deal with CIMB Group Holdings Bhd and RHB Capital Bhd fell through. President and chief executive officer Ahmad Zaini Othman reaffirmed that MBSB has not received the green light from its shareholders to talk to any financial institution on a potential merger and acquisition. Meanwhile, Ahmad Zaini signed a Memorandum of Understanding (MoU) on behalf of MBSB with Credit and Debt Management Agency (AKPK). The MoU will enable MBSB to participate in AKPK’s debt management programme, which will see the latter extending its services.
Bank Islam Malaysia expects a 20% year-on-year growth for its financing assets this year led by its retail financing business with demand for individual and housing credit. Bank Islam will also focuse on growing its fee-based income which had been very encouraging in the recent period. Cost is a major concern for banks. There has been some softening in loan demand. Bank Islam has originally been concentrating more on owner-occupied houses rather than speculation-based buying. The bank is planning to open at least five new branches in Malaysia by the end of this year with the first one being in Kelantan. Currently, the bank has 133 branches and a total retail deposit of about RM8 billion.
Bank Muamalat Malaysia expects financing for small and medium enterprises (SMEs) to contribute between 15% and 20% of its total financial portfolio for 2014. CEO Mohd Redza Shah Abdul Wahid said this will represent up to RM1.2 billion of its loans. He said the bank’s loan growth for the consumer segment was 18%, however, it was reduced to 12% this year. This is due to the bank's consumer segment softening after Bank Negara Malaysia’s (BNM) measures especially on home financing and personal financing. Besides, Bank Muamalat signed a MoU with Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry (KLSICCI) and Kuala Lumpur Malay Chamber of Commerce (KLMCC). It will help the institution to increase its customer base for SME financing.
Construction-based Eversendai Corp Bhd’s majority shareholder feels the company is undervalued and does not reflect the company’s true business potential and track record. Eversendai’s executive chairman and group managing director AK Nathan said that right now it is important to build up the base, build up the business. He also opined that the share price can not be suppressed for too long. However, construction stocks in Malaysia have been underperforming at the moment. Moreover, Eversendai’s lack of liquidity is also an issue in attracting fund managers to invest in the company.
According to Bahrain central bank executive director Khalid Hamad Abdul Rahman Hamad, making Islamic Financial Services Board (IFSB) standard mandatory is essential to take Islamic finance to the next level which is internationalisation. Until now, the articles of association of IFSB is voluntary and does not require the member countries to adopt. With the standard being mandatory, situations or regulatory arbitrage can be avoided. Moreover, Khalid Hamad noted that growth for a certain industry would require proper regulations, good standards in accounting, practice, prudential and skilled resources. He added that Islamic finance must invest in syariah-compliant instruments that create value for the society.
As a global leader in the field of Islamic finance, Malaysia boasts with state-of-the-art infrastructure and unparalleled government support. The development of Commodity Murabaha (CM) transactions on Bursa Malaysia under its Bursa Suq Al Sila’ enabled the country to try to snatch away the business of liquidity management by Islamic banks from the London Metal Exchange (LME). Bursa Malaysia’s Suq Al Sila’ is a representation of trading in commodities with complete irrelevance of commodities to the intended outcome. This exceeds simple exchange of cash between two participating banks.
According to a statement by CIMB Group Holdings Bhd, the sale of its 49% stakes worth RM1.11 billion in CIMB Aviva Assurance Bhd and CIMB Aviva Takaful Bhd to Khazanah Nasional Bhd has been completed. The life insurance and takaful companies stake sales are satisfied by RM1.06 billion in cash combined with RM43.5 million worth of shares in a new insurance holding company called Renggis Ventures Sdn Bhd. The latter s wholly-owned by Khazanah. To sum up, CIMB will maintain an effective 2% interest in CIMB Aviva Assurance and CIMB Aviva Takaful respectively.
DanaInfra Nasional Bhd's RM300 million sukuk aiming to partially fund the Klang Valley’s mass rapid transit (MRT) will make its kick-start retail trading of bonds on Bursa Malaysia. Moreover, it is likely that the sukuk will attract he issuance of private debt securities such as conventional bonds and Malaysian Government Securities (MGS) which will be publicly available. According to Tajuddin Atan - CEO of Bursa Malaysia Bhd - a number of parties have expressed their interest in issuing retail bonds. In addition, there should be ample amount of issuance for the successful trading of these bonds on the local exchange.
Islamic finance in Malaysia prepares to compete more aggressively in the global financial market in order to continue its growth on a new level. In spite of the expected challenging year ahead and the slowdown in global economy, the continuation of the country's growth trajectory is very likely. The main reasons for the industry to remain favourable are the robust achievement recorded throughout the year combined with the “safe-haven investment” sentiment among investors.