Malaysia

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.

Steady demand for Islamic bonds expected to lend support to #sukuk market

The recovery of the sukuk market is expected to continue as the threat of a steep increase in US interest rates is quickly diminishing. Based on the view of lower interest rates for a longer period, CEO of Maybank Islamic Asset Management, Ahmad Najib Nazlan has a cautiously optimistic outlook on the sukuk market. Following a renewed positive sentiment, Indonesia’s Financial Services Authority (OJK) recently called on state-owned firms to issue more Islamic bonds. In Malaysia the Employees Provident Fund (EPF) is also calling on the government to increase the supply of ringgit sukuk as it gears up for the launch of its shariah-compliant option for contributors in January 2017.

1MDB Bond Fates Diverge as Abu Dhabi Vow Trumps Najib Support

The fates of 1MDB bonds are diverging this month: those guaranteed by Abu Dhabi’s sovereign wealth fund have rallied, while notes with support from Malaysia’s own government have dropped. 1MDB's 4.4% 2023 notes, backed by the government, slumped 6.4% in May, set for the worst slide in 16 months. The fund’s 5.99% 2022 bonds, backed by Abu Dhabi’s International Petroleum Investment gained 1.9%. The contrast reflects growing investor concern about the Malaysian government backing as Najib grapples with an economy forecast to expand at the slowest pace in seven years amid a collapse in oil prices.

RAM Ratings assigns A3 rating to Bank Muamalat’s proposed subordinated #Sukuk

RAM Ratings has assigned an A3/Stable rating to Bank Muamalat Malaysia's proposed Up to MYR 1 billion Subordinated Sukuk Murabahahh Programme. The proposed Sukuk is Basel III-compliant and will qualify as tier-2 capital. The bank aims to continue concentrating on personal and corporate financing this year while de-emphasising its home-financing portfolio, given the competitive mortgage segment. Bank Muamalat has made significant strides in cost savings, which had contributed to higher y-o-y pre-tax profits in 9M FY Mar 2016. Profitability, however, remains weak compared to peers.

#Malaysia 1MDB scandal: Prime minister's brother Nazir Razak cleared of wrongdoing by CIMB bank

Nazir Razak, the brother of Malaysian Prime Minister, Najib Razak, has been cleared of any wrongdoing by an independent investigation undertaken by CIMB Group. Nazir voluntarily took a leave of absence to allow an independent review to be carried out after it was revealed that he had transferred cash to the ruling coalition's politicians in the run-up to the Malaysian general elections in 2013. Although he admitted to transferring the money, Nazir insisted he did nothing illegal. Nazir has now resumed his role as CIMB Group chairman and CIMB Bank director.

$170 Billion in #Malaysia Pensions Cry Out for More Islamic Bonds

Malaysia’s biggest pension fund is calling on the government to increase the supply of ringgit Islamic bonds as the manager of $170 bn starts a Shariah-compliant option for savers. The Employees Provident Fund (EPF) prepares to launch the Islamic plan with an initial 100 bn ringgit ($25 bn) in January. Currently the Shariah-compliant share of issuance is 42%. CEO Shahril Ridza Ridzuan said the government is actively looking at it. Boosting sales would help expand the range of maturities of the securities and their investor base. Overseas investors owned 19 bn ringgit of the government’s Islamic bonds in April, 8.2% of their total note holdings in the nation.

New global Islamic #venturecapitalfund enters business

A venture capital fund based on Islamic finance principles will be initiated by the end of May. It is the result of a joint initiative of the Islamic Development Bank (IDB) and Malaysia’s state-owned investment firm Malaysia Venture Capital Management. According to Treasury secretary Irwan Serigar Abdullah the initial fund size would be $100mn and could be bulked up later. In the first stages, the venture capital fund would be utilised to finance startup companies in Malaysia and the entire Southeast Asia region and could later be extended to finance entrepreneurial initiatives in other Islamic countries.

EPF makes new strides in ESG investing

#Malaysia’s Employees Provident Fund (EPF) announced plans to divest its stakes in tobacco businesses and focus on investing in assets deemed socially and environmentally responsible. CEO Shahril Ridza Ridzuan said EPF plans to dispose of its stake in British American Tobacco (Malaysia), despite not outlining a specific timeframe for the move. The first fully shariah-compliant fund (EPF-i) is planned to launch in January 2017 with an initial fund size of between 80 and 100 bin ringgit. Preparing for the launch of the EPF-i, the fund had increased its exposure to shariah-compliant investments covering multi-asset classes to about 40% of total investments.

EPF: Members welcome syariah scheme

In #Malaysia the Employees Provident Fund (EPF) expects 1.5 mn to 2 mn members to convert their contributions to the syariah-compliant fund in the first year of implementation. CEO Datuk Shahril Ridza Ridzuan said 71% of the members agreed on the need for the Islamic pension scheme called Simpanan Shariah. Simpanan Shariah’s initial fund size will be RM120 bn. EPF is in the process of classifying its assets as syariah-compliant and conventional, with about 40% of its assets now fully syariah-compliant.

#Singapore charges ex-BSI banker with forgery in 1MDB-linked probe

Singapore charged a former wealth manager at Swiss private bank with forgery as part of a money laundering investigation related to 1Malaysia Development. The forgery charge is the seventh filed against Yeo Jiawei, a 33-year-old Singaporean banker. While the charges didn't mention 1MDB by name, they stem from investigations into the fund's money flows. The prosecutors charged Yeo with "fraudulently" signing a reference letter to the head of anti-money laundering and sanctions compliance of Citigroup Inc in Europe.

Wide range of #Islamicproducts will appeal to all

OCBC Malaysia head of consumer financial services Lim Wyson said increasing the number of products under the Islamic asset class will appeal to a broader range of investors. The size of Malaysia’s Islamic capital market had more than tripled over the last 10 years, with an average growth of 11.7% per annum and accounted 60% of the entire capital market in the country.

Ringgit Stabilizing Attracts RHB Islamic to Longer-Dated #Sukuk

RHB Islamic International Asset Management is favoring the sovereign and corporate debt in maturities of 7 to 10 years. CEO Sharizad Jumaat said the company sees limited currency weakness in 2016 and expects the key central bank rate to remain unchanged. Sharizad said the ringgit will be quite stable within the weak environment of slower growth in China and Europe.

#Turkey Wants #Islamic #Megabank in Istanbul as Jakarta Talks Loom

Turkey wants to set up a new Islamic megabank. Deputy Prime Minister Mehmet Simsek said the prime shareholders would be Turkey's Treasury and the Islamic Development Bank. Simsek prepares for talks with Indonesia in Jakarta next week on proposals to start a Shariah-compliant megabank that will lend to companies and infrastructure projects. Indonesia and Malaysia have long tried separately to establish a Shariah-compliant lender but faced obstacles until now. Turkey is ready to commit more than $300 mn for the lender as capital.

Bank Negara #Malaysia Governor maps out strategies to elevate Islamic finance to a new level

Bank Negara Malaysia Governor Datuk Muhammad Ibrahim called on the Islamic finance sector to embrace the financial technological revolution. Technologically-driven applications have spread to every segment of the financial sector, with the number of fintech start-ups having doubled in one year. He noted that the potential impact can be significant, with 10 to 40 % banking revenue possibly at risk by 2025 due to fintech innovations outside banking institutions that are able to offer significant pricing advantage. Bank Negara is reviewing the changes needed to its regulatory framework to ensure that it remains appropriate to manage the risk while encouraging productive innovation.

#Sukuk Issuance Expected To Increase In 2016, Says IFSB

The Islamic Financial Services Board (IFSB) sees a potential for an increase of sukuk funding in 2016 in line with regulatory reforms in the industry such as Basel III and Guidance Note 6 (GN-6). Secretary-General Jaseem Ahmed said sovereign sukuk sector might gain momentum this year on the back of increased budget deficits, particularly in the energy-exporting countries. He added that Islamic banking assets showed a positive association with oil revenues while the liquidity and profitability of Islamic banks might be adversely affected by low oil prices.

#Islamic finance can fund long-term development projects

Islamic finance is well suited to bridge financing gaps in long-term infrastructure development projects, especially in less developed markets. Deputy finance minister Datuk Johari Abdul Ghani said Islamic financing had huge potential and could meet long-term funding needs since it suited its asset-based and risk-sharing nature. The global Islamic capital market has expanded in size and depth across areas, with a combined market value of over US$21.5tril spread across 70 jurisdictions.

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