The Business Times

Jumbo #sukuk swells #Malaysia's infrastructure bond pipeline

The Pan-Borneo Highway in East Malaysia, a jumbo project estimated to cost 27 bin ringgit ($9.16 bn), is finally starting to take shape as the federal government prepares to launch initial funding to start the construction. The selected group of banks includes the four top Malaysian lenders: CIMB, AmInvestment Bank, Maybank and RHB. About 60 per cent of the project will eventually be funded with proceeds from ringgit-denominated Islamic bonds to be issued through federal government funding vehicle DanaInfra Nasional. The first batch of bonds, wrapped with a federal government guarantee, is expected to raise around 10 billion ringgit. The launch is timed for August or September.

#Indonesia #sukuk beats #Malaysia in attracting Brexit-haven funds

Indonesia's Islamic bond yields have fallen faster than Malaysia's in the past three months, as the nation's higher-yielding notes do better at attracting foreign investors. Yields on rupiah sukuk due 2019 slid 37 basis points in the period, compared with 24 basis points for equivalent paper in Malaysia. Indonesia's three-year Islamic bonds pay 7.16%, while those in Malaysia yield 3.26%. Indonesian bonds are the best performers in South-east Asia this year after the government passed a tax amnesty bill on undeclared income held overseas. Bank Negara Malaysia lowered borrowing costs for oil, as well as its projection for consumer prices to 2%-3% in 2016, from 2.5%-3.5 %. Currently both nation's currencies are seeing a revival.

Islamic Development Bank to elect new president next week

The Islamic Development Bank (IDB) will elect a new president next week in Jakarta, replacing long-serving president Ahmad Mohamed Ali. Saudi Arabia, the IDB's largest shareholder, has nominated Bandar Hajjar for the post. His candidacy was also endorsed by the outgoing IDB president. The new president will have big shoes to fill: Mr Ali tripled the bank's authorised capital to US$150 bn in 2013 and last year up-sized its sukuk issuance programme to US$25 bn.

Malaysia said planning as much as US$1.5b islamic bond sale

Malaysia plans to sell as much as US$1.5 billion of global Islamic bonds, less than a month after Indonesia's sukuk attracted bids of more than three times the offered amount. The marketing of the notes started on Monday and they will likely have maturities of 10 and 30 years. The proceeds will be used to refinance US$1.2 billion of Shariah-compliant debt coming due in July. Malaysia's sale coincides with a rebound in the ringgit, which has rallied more than 10 per cent this year. A pick up in Brent crude is also brightening the outlook for the oil exporter's finances, just as sentiment is improving after an indebted state investment company sold off assets.

Indonesia hopes new hedging rules will attract sharia-compliant investors

Indonesia's central bank has issued a regulation that allows the use of Islamic foreign exchange hedging tools by banks. The regulation, backed by rulings by Indonesia's National Sharia Board, specified that both Islamic and conventional banks can now offer deferred sale of foreign exchange under a muwa'adah scheme, or under a promise from both sides of a transaction. Such a transaction has to have an underlying real need, which could be export and import payments, Islamic bonds transaction in foreign currencies or hajj payments, among others. It will not be tradable and will have to be fully settled upon maturity or cancellation. The new rules will help Islamic banking and sharia-compliant customers to mitigate market risks.

Family offices in Asia, the Middle East to double, Insead says

The number of family offices in Asia and the Middle East will more than double to about 400 over the next eight years as the ranks of wealthy individuals swell, Michael Prahl of Insead business school said. Driven by the region's economic expansion, the number of wealthy individuals is expected to rise 40 percent by 2023. Family offices manage assets as well as provide tax, legal, accounting and philanthropy services to the wealthy. In the average Asian family office, just three investment professionals manage about US$400 million of assets, according to Insead. That compares with five to six professionals managing between US$300 million and US$1 billion in Europe or the US.

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