IslamicFinance.de

Saudi Arabia's Jadwa Investment says it is planning to invest in domestic real estate as it expands into new asset classes, hoping to cash in on booming demand for new homes. Tariq al-Sudairy, managing director and CEO of Jadwa, said the group will focus on the asset class and target major cities like Riyadh, Mecca, Madina. Jadwa would partner with real estate developers to select and execute projects on behalf of clients. Funds would be set up as projects were selected and the size of the investment would be determined on a case-by-case basis. Sudairy said private equity in the kingdom offered significant potential as well. Jadwa itself hopes to seal an unspecified deal as early as the first quarter of 2015.

As oil prices plunge to four year-lows, the big news in the Gulf's debt market is that it is outperforming most of the rest of the world. Although the Gulf's oil exporters will suffer from low oil prices, Gulf bond prices have mostly been firm since June, for two reasons. One is that most investors and economists think the big Gulf Arab economies are not seriously under threat; they have amassed huge financial reserves. Also, Gulf funds and investment institutions have large amounts of free cash - the result of the region's economic boom - which they are happy to use to buy local bonds whenever foreign investors are tempted to sell.

Bank Asya's net loss in the third quarter was due to higher loan provisions as it sought to increase its asset quality, and the Islamic lender's operations are continuing "healthily," the Turkish bank said in a statement on Tuesday. Bank Asya fell to a 301 million lira ($133 million) net loss in the third quarter from a 60 million lira profit a year earlier as its assets declined sharply, it said earlier in a stock exchange filing. The bank said its capital adequacy ratio stood at 18.32 percent.

Turkey's Bank Asya on Tuesday posted a third-quarter net loss on loan provisions and a shrinking balance sheet but said its operations were healthy despite political turmoil that has surrounded it for much of the year. The Islamic lender fell to a 301 million lira ($133 million) net loss from a 60 million lira profit a year earlier. Assets of 16.5 billion lira at the end of the third quarter were down 40 percent from the end of 2013, while deposits almost halved to 10.07 billion over the same period. The bank continued its operations with a capital adequacy ratio of 18.32 percent, despite a 9-month loss due to higher loan provisions as part of efforts to increase asset quality, Chief Executive Ahmet Beyaz said.

A series of German-funded studies and pilot projects aims to bridge the gap between Islamic finance and microcredit, to the benefit of communities in developing countries. Expanding the appeal of Islamic microfinance is crucial for an estimated 650 million Muslims who live on less than $2 a day, according to the Washington-based Consultative Group to Assist the Poor (CGAP). The German government's international development agency GIZ is helping to develop regulations, education and training for Islamic microfinance in developing countries. A study of Islamic microfinance products by GIZ and CGAP aims to identify ways to lower costs, while a separate GIZ study is exploring demand factors.

The scope of Britain's Islamic finance market is widening with several initiatives from the government and private sector, although the country is about to lose European Islamic Investment Bank, one of its six full-fledged Islamic banks. Last week a government official said the central bank would look into developing a liquidity management tool for use by Islamic banks, while Britain's export credit agency expects to guarantee sukuk for the first time next year, an issue by a customer of European plane maker Airbus. Taken together, the new official initiatives seem likely to create a more benign environment for Islamic finance, allowing banks to operate more flexibly and efficiently, and therefore more cheaply.

Bank Islam Brunei Darussalam (BIBD) is helping to arrange a benchmark-sized Islamic syndicated loan which it hopes to close later this year for a petrochemical project in the oil-rich sultanate. Currency and tenor are being finalised for the deal, said Javed Ahmad, BIBD's managing director. The new syndicated loan could open a much wider pipeline of deals in Brunei, which might be denominated in both local and foreign currencies, Ahmad said. Besides, in the medium term BIBD will consider establishing a regional footprint across Asia to enhance its growth prospects, with Malaysia and Indonesia offering the greatest opportunities, Ahmad said.

The asset management arm of Malaysia's Malayan Banking Bhd has launched its first U.S. dollar-denominated mutual fund that invests in Islamic bonds. The new fund will invest partly in sukuk issued from Gulf countries. This is rare for Malaysian funds, because there is an abundant supply of local ringgit-denominated sukuk, but demand for dollar-denominated paper has been growing. The fund will initially be available to Malaysian investors only, although the firm plans to distribute the fund overseas as well, Nor' Azamin Salleh, chief executive of Maybank Asset Management Group Bhd, said.

Morocco's BMCE Bank is preparing to launch an Islamic subsidiary as a joint venture with a major Islamic financial institution from the Middle East. Moreover, the Moroccan parliament is discussing a bill that would regulate Islamic banks and sukuk issues; approval is expected before the end of this year. Meanwhile, Tunisia is gearing up for its first sovereign sukuk issue, and in July, regulators in Jordan introduced rules for sukuk. Banks from Kuwait, Qatar, Bahrain and the United Arab Emirates have expressed interest in entering Morocco when its Islamic finance bill comes into force. Moroccan authorities are expected to guide the foreign banks toward partnering with local banks rather than establishing fully owned Islamic subsidiaries.

Competition is increasing among the world’s financial centers to grab a slice of Islamic finance, which is expanding beyond its traditional bases in southeast Asia and the Middle East. The focus is mostly on the booming market for sukuk (Islamic bonds). Luxembourg, Britain and Hong Kong are seeking to draw more issuance activity and have already made debut issues of sovereign sukuk this year. But Liechtenstein, is instead concentrating on wealth management through a coordinated effort by the public and private sectors.

According to the finance minister, Luxembourg has issued its first 200 million euro ($254 million) five-year Islamic bond, distributed across 29 accounts, although the market favours dollar-denomineted sukuk. Nevertheless the country thereby becomes the first AAA-rated government to issue euro-denominated sukuk, or Islamic bonds, following London, Hong Kong and South Africa. Luxembourg hired HSBC, BNP Paribas, Banque Internationale à Luxembourg and Qatar-based QInvest to arrange its sukuk.

The Islamic Development Bank is aiming to price a U.S. dollar-denominated sukuk of benchmark size and five years duration on Thursday, after releasing initial price guidance for the issue. The Jeddah-based institution is targeting pricing in the area of 15 basis points over midswaps. The IDB was due to wrap up a series of investor meetings on Wednesday after announcing last week it had chosen banks to arrange roadshows ahead of a potential deal. The AAA-rated IDB chose CIMB, Deutsche Bank, First Gulf Bank, GIB Capital, HSBC, Maybank, Natixis, National Bank of Abu Dhabi, and Standard Chartered as arrangers.

Indonesia's financial services authority, Otoritas Jasa Keuangan (OJK) is preparing a five-year blueprint aimed at industry issues such as sector consolidation, a lack of scale and foreign ownership limits. OJK said it was now preparing draft regulations for Islamic pension funds, after Indonesia's national sharia council issued a ruling approving the overall concept in November last year. Under a "moderate" scenario, the OJK projects Islamic banking assets will grow by 14.4 percent in 2014, down from 24.2 percent in 2013 and 34 percent in 2012, although these figures would remain above those for conventional banks. The OJK said challenges faced by Islamic banks were mainly internal, rather than related to external pressures such as falling commodity prices or lower export demand.

JANY Sukuk Company Limited priced a bond on Tuesday, with the Goldman Sachs Group, Inc as Guarantor. The Issue Amount is $500 million, its Maturity Date is September 23, 2019. Following are terms and conditions of the bond: Coupon 2.844 pct; Issue price Par; Spread 90 basis points; Underlying govt bond over the midswaps; Payment Date September 23, 2014. Lead Managers are Goldman Sachs International, Abu Dhabi Islamic Bank, Emirates NBD Capital, National Bank of Abu Dhabi, NCB Capital and QInvest. Fitch has assigned a rating of A, and Standard & Poor's A-.

Goldman Sachs has set initial price thoughts in the 95 basis points area over midswaps for its debut five-year, benchmark-sized U.S. dollar Islamic bond issue. The investment bank finished two days of investor meetings in the Middle East on Sept. 11. Goldman picked itself, Abu Dhabi Islamic Bank, Emirates NBD, National Bank of Abu Dhabi, QInvest and IPO-NACO.SE to arrange the investor meetings. The sukuk is being issued through a vehicle called JANY Sukuk Co and will be guaranteed by Goldman Sachs. The issue is expected to be rated A-minus by Standard & Poor's and A by Fitch Ratings, identical to the ratings of the investment bank. It will be listed on the Luxembourg Stock Exchange.

Islamic bond programmes from a trio of big conventional banks are set to expand the boundaries of Islamic finance, helping open the market to first-time issuers while testing the banks' ability to win over industry purists. Since June, France's Societe Generale, Bank of Tokyo-Mitsubishi UFJ (BTMU) and Goldman Sachs have set up sukuk programmes, aiming to tap the pool of cash-rich Islamic investors. They are treading a fine line, having to reconcile the fact that their businesses mostly depend on conventional banking practices. If the three banks are successful and become regular sukuk issuers, they could help to widen Islamic finance beyond its core markets in the Middle East and southeast Asia.

The International Finance Facility for Immunisation Co. (IFFI), for which the World Bank acts as treasury manager, has picked four banks for a potential U.S. dollar-denominated sukuk. Rated AA by Standard and Poor's and AA+ by Fitch, IFFI has mandated Qatar's Barwa Bank, National Bank of Abu Dhabi, and Standard Chartered to arrange investor meetings in the Middle East, Europe and Asia. A potential sukuk offer may follow the roadshows - for which a schedule has not been given - subject to market conditions before the end of the year.

The Bank of Tokyo-Mitsubishi UFJ (BTMU) hopes to expand its Islamic finance business across Asia and the Gulf, buoyed by a landmark multi-currency sukuk programme set up in Malaysia. BTMU, part of the Mitsubishi UFJ Financial Group, set up its sukuk programme in June. The programme will allow its wholly-owned Malaysian unit, BTMU Malaysia Berhard, to raise the equivalent of $500 million via sukuk with tenors of up to 10 years. It provides an alternative funding source for BTMU Malaysia to manage its liquidity to match increasing and growing exposures in multi-currency sharia-compliant financing. No timeframe was given for the first transaction, although the bank is increasingly active in the Islamic capital market.

Sharjah has announced initial price guidance of 120bp area over mid-swaps for a US dollar benchmark-sized 10-year sukuk. That follows initial price thoughts of low-mid 100s over mid-swaps, released earlier on Tuesday. Demand for the bond, which is expected to price on Wednesday, is more than US$4bn. HSBC, KFH Investment, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered are the lead managers on the Reg S sukuk.

Saudi Islamic investment firm Itqan Capital plans to expand its investment and advisory activities in the kingdom after it received regulatory approval to boost its capital. The firm will increase its capital by 100 million riyals ($26.6 million) to 173.4 million riyals by the end of October, said Adil Dahlawi, managing director and chief executive of Itqan Capital. Itqan currently manages four sharia-compliant funds: a money market fund and three real estate funds. New product launches are scheduled this year with two funds in the pipeline, the first of which is a private equity fund investing in the Saudi education market, Dahlawi said. About half of all assets under management in Saudi Arabia follow Islamic investment principles.