Malaysia

MY Dealbook: Maxis plans $2.5b #sukuk, IDB to float bonds worth $86.6m

Maxis Broadband, a unit under telecommunications group Maxis, is planning a sukuk issuance to raise as much as MYR10 bn for acquisitions and capital expenditure. CIMB Investment Bank is the sole principal adviser and sole lead arranger for the programme, while CIMB Islamic Bank is the shariah adviser for the programme. The Islamic Development Bank (IDB) has issued a MYR350 mn ($86.6 mn) sukuk for project financing and other development activities. IDB president Ahmad Mohamed Ali said the successful issuance of sukuk in Malaysian Ringgit is a testimony to the increasing interest for sukuk.

Will BIMB be reorganised soon?

After the listing of RHB Bank, attention is now on whether BIMB will do the same with Bank Islam Malaysia. Bank Islam is the oldest and largest standalone Islamic bank in Malaysia with an asset size of RM55.46 bn as at March 31. It also owns a 59.9% stake in insurer Syarikat Takaful Malaysia, while its other core business is BIMB Securities. BIMB, in turn is 53.6% controlled by pilgrim fund Lembaga Tabung Haji (LTH). It is believed that the bank still holds the dream to move into the big league and grow market share. However, it will not be able to achieve mega Islamic bank dream unless it mergers.

#Malaysia: #Succession Planning Of Family Businesses From An Islamic Perspective

There is evidence both in the Quran and Hadith that supports wealth succession planning and management. A starting point for a discussion on Islamic wealth management would be the Quranic verses in Surah al-Kahf (Surah no. 18). There are lessons that we may draw from these Quranic verses. These verses indicate that although a person cannot foresee future events, he/she should take measures and have plans to manage their unfavourable effects on life and family welfare. That parents may have a succession plan through which the wealth earned could be transferred to children in the safest possible way.

#Malaysia approaches #fintech with Islamic twist

Malaysia is adapting to fintech revolution by adjusting its financial regulatory guidelines with an Islamic angle. According to Muhammad bin Ibrahim, governor of the Central Bank of Malaysia, the recent Islamic finance initiative could be the next game changer. The Investment Account Platform (IAP) is a platform that connects lenders, banks and enterprises seeking funds, one that could shift the role of Islamic lenders to investment intermediaries. Serving as a central marketplace to finance small and medium-sized enterprises (SMEs), the IAP was launched by six Malaysian Islamic banks: Affin Holdings, Bank Islam Malaysia, Bank Muamalat Malaysia, Maybank Islamic, Bank Kerjasama Rakyat Malaysia and Bank Simpanan Nasional.

#1MDB: #Malaysia’s biggest scam?

Malaysia has been rocked for more than a year by a financial scandal involving Prime Minister Najib Razak, a state investment firm, and an alleged frenzy of embezzlement. Authorities in a half-dozen countries have launched investigations into suspicions that several billion dollars was looted from complicated financial transactions involving 1MDB and parked around the world. Over the past year, Najib has purged 1MDB critics from his cabinet, curbed domestic investigations, and moved to prevent further discussion of the scandal. Najib has dramatically strengthened his control of the country. A state-level election and two parliamentary by-elections were won handily by Najib's ruling coalition, further bolstering his position.

Chellam Plantations’ RM300 million #sukuk gets Danajamin guarantee

In #Malaysia Danajamin Nasional is guaranteeing a 17-year sukuk murabahah programme amounting to RM300 million for Chellam Plantations. The first tranche of the programme amounting to RM150 million with a tenure of up to 17 years, was issued and subscribed last Friday. Funds from the sukuk issuance will support Chellam Plantations’ new planting in Kalimantan and expansion in Indonesia. Proceeds from the sukuk will also be used to refinance its outstanding borrowings and finance its capital expenditures. Joint lead arrangers of the transaction are RHB Investment Bank and OCBC Al-Amin Bank.

#Malaysia’s Sarawak Hidro Said to Plan $1.3 Billion #Sukuk Sale

Sarawak Hidro, the state-owned developer of Malaysia’s biggest hydropower project, plans to offer 5.5 billion ringgit ($1.3 billion) of sukuk without a government guarantee. The electricity generator is weaning off government guarantees to ease the nation’s fiscal burden. Sarawak Hidro’s plant on Borneo island is part of Prime Minister Najib Razak’s $444 billion development plan to become a developed economy by 2020. Malaysia aims to cut its ratio of debt to gross domestic product to 45% by 2020, from 54.5% at the end of last year.

#EPF allocates US$24.64 billion to #shariah #fund

Malaysia’s Employees Provident Fund is allocating an initial fund size of 100 bn ringgit (US$24.64 bn) – equivalent to 14.67% of 681.71 bn ringgit in total AUM as at March 31, 2016 – to shariah investments, making the Shariah-compliant allocation the largest in the world thus far.
The move is in accordance with the EPF’s plan to roll out its shariah-compliant fund – also known as EPF-i – in January 2017. What sets the fund apart from its conventional counterpart is that the former is not exposed to banking and insurance stocks. Meanwhile, contributors are free to choose from among the two schemes.
Shahril Ridza Ridzuan, chief executive officer of EPF, says the fund has been investing in shariah-compliant assets for more than five years and about 45% of its existing total assets – worth 295 bn ringgit – already conform to Islamic principles.
In fact, prior to the launch of EPF-i, the EPF had assured investors that its investment considerations are in line with ESG practices, as it does not invest in businesses related to gambling, adult entertainment and alcohol.

What a #Brexit could mean for the UK’s aspiring #Islamic #finance #market

As the referendum on whether to leave or remain in the European Union looms in the UK, voices are getting louder, particularly in the country’s financial industry that it would not necessarily be a good idea to vote for a Brexit. Since the weight of the UK in the global financial market is substantial – the financial sector of the City of London has a 20% share in the global market for trading foreign securities and a sizeable part of it depends on the UK’s access to the internal EU market – such a strong position would be certainly threatened.
This could have serious impact on the growing role of Islamic finance in Europe which is entrenched in the UK and from there makes its way into the continent. Since the 1990s, when the first mortgages in the UK were set up in line with Shariah law, the country has aggregated the most advanced experience in Shariah-compliant finance in the Western world. Corporate sukuk followed a decade later, and in 2014, the UK became the first country in the EU to issue some sovereign sukuk and listed them on the London stock exchange. From then on, Islamic finance steadily entered the rest of Europe.

A record first quarter for #Sukuk

Issuance of Sukuk is up all around the world, up on last year, due to current economic factors and the goodwill for the instrument among global investors
The good news on the Sukuk front is continuing. The proportion of Sukuk bond issuance hit a record in the first quarter of 2016 in the main markets for this form of finance, said Fitch Ratings. According to Fitch’s data, there is a clear upwards trend in use of Shari'ah-compliant borrowing as more countries create legal frameworks to support issuance and as issuers try to attract a broader investor base, including Islamic finance investors.
Total new Sukuk issuance in the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan was around $11.1 billion in the first quarter of 2016, with a maturity of 18 months. Issuance was up 22% from the fourth quarter of 2015 and 21% from a year earlier, while non-Sukuk bond issuance of $17.1 billion was down 23% quarter on quarter and 45% year on year. Sukuk represented 39.3% of total bond and Sukuk issuance in these countries during the quarter—the highest proportion in the past eight years.

#Moodys’ Raised Emaar #Sukuk to Baa3 and EIB Sukuk to A3

Highlights and Performance
Bloomberg Malaysia Sukuk
Bloomberg Malaysia Sukuk Ex-MYR Total Return and Dow Jones Sukuk Total Return indices ended relatively flat at 103.9 (+0.02%) and 159.8 +0.01%) respectively, with yields tightened marginally by 0.6bps to 2.470%. Combined with the Fed‘s dovish meeting (June 15), uncertainty over the Brexit referendum jitters (June 23) and mixed signals from China over slowing economy bring the risk-adverse sentiment. The top performers over the week were INDOIS 3/26 and GS 9/19, which moved -11bps to -13bps; while the underperformers were dominated by banking papers — EIB 1/17, Noor Bank B3T1 and DIB B2T1 which widened 12bps each.
Bank Indonesia
Bank Indonesia cuts key policy rates by 25bps in a surprise move, with the BI rate, deposit facility rate and 7-day reverse repo rate now stand at 6.50%, 4.50% and 5.25% respectively. In addition to the rate cut, BI also raised the minimum threshold on loan-to-funding ratio to 80% from 78%. Indonesia risk premiums widened 1.5bps to 196.0bps.

#Islamic institutions and yield seekers push up #sukuk demand

On the demand side, the institutional demand for high quality liquid assets are expected to keep sukuk demand high. As we get closer to the deadline of Basel III implementation, the lack of liquidity management instruments in Islamic finance is pushing this issue to the forefront.
Among the global economic developments, one positive driver for sukuk issuance could be the European Central Bank’s quantitative easing that might prompt some European investors to take positions on higher-yielding but riskier emerging-markets assets such as sukuk. Negative interest rates in Europe and Japan also are likely to attract investor of Gulf sukuk issues.
In 2015, the market saw $11.3 bn (17% to the total) in sukuk issuance for liquidity management purposes. The International Islamic Liquidity Management Corp. alone issued $6.4 bn and is actively working on providing solutions to the market. Other stakeholders such as sovereign and central banks are now conscious of the role they have to play. In 2015, the market also saw another $4.9 bn issued in form of capital-boosting sukuk by financial institutions in the GCC and Malaysia.

#Estate planning: The benefits of Islamic estate planning (Pt 1)

In #Malaysia estate planning is an often forgotten element in a Muslim’s financial plan. According to Abdul Aziz Peru Mohamed, CEO of as-Salihin Trustee, estate planning is how we protect the assets we have spent a lifetime accumulating. He says 85% of the local Muslim population have not done any estate planning. There had been an estimated RM60 billion worth of unclaimed assets since the country’s independence in 1957. This is a substantial increase from RM42 billion worth of frozen assets in 2011. By having a will or trust, the issue of unclaimed assets will not arise as the settlor will appoint an executor or trustee to manage the deceased’s assets.

Islamic finance looks for a second wind

At a conference on Islamic finance in Singapore many experts warned that the industry depends too heavily on oil and gas for revenue. According to expert Rushdi Siddiqui the industry saw a 43% drop in sukuk issuance and he argued for the need to 'delink' Islamic finance from oil and gas. Other participants noted that the industry's growth is slowed by the 'perception price' that comes with political volatility in the Middle East and Malaysia.

RHB #Sukuk Weekly: #Turkey Sukuk to be within the 5y tenor in range USD1-1.5bn

In the USD sukuk pipeline, DP World and Noor Bank have selected banks for a possible benchmark issuance. Turkey’s Deputy Prime Minister Mehmet Simsek mentioned plans of an issuance within 1H16. Bloomberg Malaysia Sukuk Ex-MYR Total Return (BMSXMTR) and Dow Jones Sukuk Total Return (DJSUKTXR) indices closed lower at 103.55 (-0.26%) and 159.18 (-0.44%) respectively. Malaysia’s revenue fell slightly to MYR1.54bn (-0.7%) in 2015 while income tax revenue increased by 7.8%. Turkey's unemployment rate declined to 10.9% and its government budget balance improved to TRY5.36bn in April. Indonesia’s trade balance rose to USD667m in April mainly due to the larger than expected decline in imports.

1MDB Pays Coupon on Debt After Missing Two Interest Payments

#Malaysia’s state investment company 1MDB paid the coupon on its Islamic debt after missing two payments on other securities earlier. The company undertook the scheduled payment of 143.8 million ringgit ($34.9 million) on its 5 billion ringgit 5.75% notes due 2039. President Arul Kanda said 1MDB has ample liquidity to make interest payments and service its current debt obligations. 1MDB’s separate $1.75 billion of 5.99% notes due 2022, which are guaranteed by IPIC, rose 0.1 cent to 103.7.

#Malaysia's Bank Muamalat to raise up to 1 bln rgt via #sukuk

Malaysia's Bank Muamalat will set up a 1 bn ringgit ($243.4 mn) sukuk programme after redeeming 400 mn ringgit worth of subordinated sukuk on June 15. Bank Muamalat's new sukuk programme has loss-absorption features to meet Basel III criteria, qualifying as Tier 2 capital. In February, Bank Muamalat and Malaysia Building Society called off merger talks that would have created one of the country's largest standalone Islamic banks.

Bank Islam denies rumours about managing director

Bank Islam #Malaysia has denied rumours that its managing director Zukri Samat would be replaced. Chairperson Zamani Abdul Ghani said the board had decided to renew Zukri’s service contract. His re-appointment has also been approved by Bank Negara Malaysia. Zamani expressed hope that Bank Islam’s staff would continue to give their full support to Zukri.

#Malaysia’s central bank closes its investigation after 1MDB pays fine

Malaysia’s central bank, Bank Negara Malaysia (BNM), announced it has closed its investigations into 1MDB after the investment firm paid a fine for non-compliance with local financial regulations. The Finance Ministry insisted that there was no misappropriation but only administrative weakness in the firm. However, 1MDB will be barred from borrowing public funds. Malaysia’s Deputy Finance Minister, Johari Abdul Ghani, said 1MDB will be dissolved once it pays off its debts. The firm currently has debts totalling RM50 billion ($16 billion) as of January, as opposed to assets of RM53 billion.

Taking Islamic social finance to the world

Sultan Nazrin Shah will lead a special session on Islamic Social Finance at the United Nation’s inaugural World Humanitarian Summit (WHS) in Istanbul. The summit is calling for a 'Grand Bargain' on finance and aid organisations will be told to stop competing for resources. The UN fell short of US$7.5bil (RM30.6bil) in funding needs last year, 30% of what it required. IDB’s research on zakat in 2015 shows an estimated US$600bil (RM2.4 trillion) available to meet humanitarian needs. If 1% of this is made available, it can meet the global funding deficit for 2015.

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