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Press Release

Today sees the launch of a new Journal on Islamic finance from dedicated Islamic finance media entity Yasaar Media.

The Journal, called So Far – the Journal of Strategic Thinking in Islamic Finance, is written and edited by members of an Islamic finance Think Tank and is modelled on traditional academic journals. The difference with So Far is that the members of the Think Tank are predominantly practitioners rather than academics.
Member of the Think Tank are drawn from the ranks of committed Islamic finance professionals around the world and range from the Gulf and the Far East to the USA and Europe.

Each issue of So Far is dedicated to a single topic of core importance to the Islamic finance industry – and the launch issue looks at the thorny issue of the problems facing the Sukuk market. Unlike many other journals So Far is distributed free in PDF format and is available from a variety of sources including Yasaar Media thus guaranteeing maximum readership and exposure.

Allianz Takaful is in talks with a regional Islamic institution, urging it to issue a sukuk bond earmarked for the industry, as it struggles to find long term issues in the market, its chief executive said. It has been difficult for takaful - or sharia compliant - insurers to sell products like annuities and pension plans because of the lack of long term Islamic bonds to match such liabilities.

Deutsche Bank expects to bring to the market a "major" Islamic bond in Saudi Arabia by the end of the first quarter, as part of a wider push into the world's largest oil exporter, a company executive said on Tuesday.

Several banks in the Gulf region are considering launching Islamic bond, or sukuk, funds, some likely in the first half of the year, a top fund manager said on Wednesday.

Dubai World which is in talks to restructure some $22 billion debt, is unlikely to pay off developer Nakheel's $980 million Islamic bond, a source familiar with the matter said on Monday, and all options are open.

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The following borrowers are expected to sell Islamic bonds, which use asset returns to pay investors to comply with the religion’s ban on paying interest:

CAGAMAS BHD
LEBANON
WAHA CAPITAL PJSC
KUVEYT TURK KATILIM BANKASI AS
SAUDI ARABIAN OIL CO
LAFARGE MALAYAN CEMENT BHD
QATAR ISLAMIC BANK SAQ
PAKISTAN
TAIBA HOLDING CO
THAILAND
DEVELOPMENT BANK OF KAZAKHSTAN
KHAZANAH NASIONAL BHD

Saudi Arabian Oil Co. or Aramco, the world’s biggest crude producer, and Total SA hired Deutsche Bank AG, Samba Financial Group and Calyon to sell and manage the mainly domestic bond sale, to help fund the construction of a $12 billion oil refinery.

The Islamic Bank of Thailand plans to float 55 billion baht worth of Islamic bonds in the local and overseas markets this year, says bank president Dheerasak Suwannayos. He said the bank hoped to raise 5 billion baht from a local Islamic bond issue in the second quarter, the first issued in the Thai market.

Sales of Islamic bonds may increase 24 percent this year, led by Southeast Asia, as the region’s expansion helps drag the world out of recession, said CIMB Group Holdings Bhd., the leading arranger of such issuance.

France must host a sukuk issuance this year to show it is serious about Islamic finance and overcome the legal uncertainties that caused a delay to a 1 billion euro ($1.37 billion) issuance, a lawyer working on the deal Told Reuters on Wednesday. At least one French Islamic corporate bond, or sukuk, had been expected last year but was delayed by legal hurdles.

It's a myth to assume Islamic finance products are safer than conventional products and underlying risks should be studied more carefully, Qatar's top regulator said on Wednesday.

Despite being billed as a safer alternative to traditional banking because assets must underpin deals, Islamic bondholders have found they may not have any more legal safeguards than conventional counterparts in the event of default.

Such issues were highlighted after sukuk -- or Islamic bonds -- had the first ever defaults last year.

Sukuk, one of the flagship products in the $1 trillion Islamic finance industry, are structured as profit-sharing or rental agreements and returns are derived from underlying assets because Islamic laws prohibits paying or earning interest.

The Central Bank of Bahrain (CBB) announces that the monthly issue of the Sukuk Al-Salam Islamic securities has been oversubscribed. Subscriptions worth BD63m were received for the BD12m issue, which carries a maturity of 91 days. The expected return on the issue, which begins on 27 January 2010 and matures on 28 April 2010, is 1.05%.

Rapid growth among Saudi Arabia's Islamic insurers will benefit the domestic bond market but bypass dollardenominated issues due to regulations that keep insurers' investment close to home, experts and executives said.

Strong growth in the takaful, or insurance industry has underpinned hopes it will give a boost to the market for Islamic bonds, or sukuk.

Insurers are important investors in conventional fixed income markets, but sukuk have been mostly bought by Western investors such as hedge funds and banks.

Pakistan is due to pay $600 million on a maturing 5-year Euro Sukuk bond, on Tuesday, an SBP official said.

While the medium-term prospects for the global sukuk market remain strong, the prospects are weaker for Dubai-based issuers and potentially other countries in the Gulf. That’s the assessment of ratings agency Standard & Poor’s (S&P), which also said that Malaysia and South East Asia were likely to lead the global sukuk market in issuance of the next couple of years.

The limited availability of capital through conventional sources makes it all the more important that the oil and gas industry, in particular, consider alternative financing products. Shariah-compliant finance has the potential to unlock largely untapped liquidity in the Gulf and elsewhere that could add to and complement existing pools of capital required by the sector. (According to the Times of London, Shariah-compliant government bonds, known as sukuk bonds, comply with Islamic law, which forbids the earning of interest on money lent. Instead, bondholders receive “rent” on leasing government assets such as buildings. At the end of the bond term, the Treasury buys back the asset, releasing payments to the investor. Most Islamic financial products work on the principle of investing in a fixed asset able to generate a rate of return, such as property that yields rent, or an asset that can repay a larger capital sum on redemption.) In fact, only two months ago General Electric became the first Western industrial company to issue a sukuk bond, worth around $500 million.

Sime Darby Bhd yesterday listed its Ringgit Malaysia Sukuk Programme on Bursa Malaysia with a combined master limit of RM4.5bil under the Exempt Regime.

Medium-term growth prospects for the world's sukuk market are good, said Standard & Poor's Ratings Services in a report published today. In addition, we understand from unofficial market sources that about US$10 billion more could potentially enter the pipeline. If that comes to market, total sukuk issuance in 2010 could approach the current 2007 record of US$34.3 billion. The main uncertainty this year is market conditions.

The United Kingdom government is deciding to issue sukuk which would:

* Diversify its investor base- not a bad prospect for an indebted country- standing a chance to attract further liquidity.

* Show it is not complacent and really means business creating a benchmark in Europe, where no significant sukuk issuance occurred, excluding a 100 million euro issuance in 2004 in German region Sachsen-Anhalt. Pre-crisis rumours had it that the UK would issue sukuk worth £2 billion in short term notes making a real statement about its Islamic finance ambitions.

* Provide help to the five stand alone Islamic banks, which are required by the market regulator to put in place liquidity buffers, consisting of government bonds or cash. Because there is no sovereign sukuk, these shining monuments to London’s superiority in Islamic finance depend on debt issued by the Islamic Development Bank.

* Encourage corporate sukuk issuance, which is not too probable without the government leading by example.