Malaysia

Moody's: Malaysian sukuk ratings reflect underlying corporates' credit quality

The ratings of rated Malaysian corporate sukuk, or Islamic bonds, reflect the credit quality of the underlying corporate backing the sukuk, despite the various assets in their sukuk structures, according to Moody's Investor Service.
In a statement today, the credit rating agency said that it had reiterated its conclusion in its analysis of three Malaysian corporate sukuk which it rated in 2015, namely Axiata Group Bhd (Baa2 stable), Telekom Malaysia Bhd (TM) (A3 positive), and Petroliam Nasional Bhd (Petronas) (A1 stable).

Islamic finance assets to reach US$3.2t by 2020, says Thomson Reuters

The global Islamic finance assets are projected to grow to US$3.2 trillion (RM13.6 trillion) by 2020, says Thomson Reuters, the world’s leading provider of intelligent information for businesses and professionals.
Its Head of Islamic Finance, Mustafa Adil said Islamic finance was considered the most developed sector within the various pillars of the Islamic economy and its growth in the global industry was broadly measured by the value of Islamic finance assets.
As global acceptance of Islamic finance continues to grow, he said more corporates and non-Muslim sovereigns were announcing Islamic finance initiatives such as ethical finance or Shariah-compliant regulations, as well as sukuk issuances.

UAE, Malaysia show willingness to issue green sukuk

Currently, there is $65.9b of outstanding in labelled green bonds, with transport and energy remaining the dominant themes. Countries such as the UAE and Malaysia have shown the willingness to issue green sukuks, and advisers such as Climate Bonds Initiative hope to have at least one [issued] in 2016, the chief executive officer of the advisory firm told Gulf News.
“Dewa (Dubai Electricity and Water Authority) has said that they are considering issuing a green sukuk for clean energy,” said Sean Kidney, chief executive officer of Climate Bonds Initiative. The firm has a sukuk advisory group in the UAE, trying to promote issuance.

Takaful grows faster than conventional insurance

Malaysia’s takaful industry grew at a faster rate than conventional insurance, recording a compound annual growth rate of 12.4% in the last five years and outperforming the conventional insurance’s CAGR of 7.8%. Malaysian Takaful Association chairman Ahmad Rizlan Azman said takaful contributions last year were RM6.3 billion, accounting for a 13% share of the total insurance market.
“With Malaysia’s low insurance penetration rate of 5.2% of gross domestic product (GDP) in 2014 and its young demographics, significant market growth opportunities are yet to be tapped by its insurance and takaful sector,” Ahmad Rizlan said at the launch of the Malaysian Takaful Dynamics report on the sidelines of the 11th World Islamic Economic Forum yesterday.
The jointly developed report by the Malaysian Takaful Association and Ernst & Young (EY) Malaysia is the country’s first central compendium on Islamic insurance.
Ahmad Rizlan said the low penetration rate of takaful in the country is due to a lack of awareness about takaful-related products as well as the issue of affordability, especially among low-income groups.

Islamic finance gains traction in search for alternative models

Islamic financing is gaining traction even among non-Muslim countries in a bid to use sustainable and equitable form of alternative models, the Malaysian Prime Minister said on Tuesday. London issued its second Islamic sukuk after its first bond issue was oversubscribed 14 times. In addition to London, Luxembourg and South Africa, Hong Kong has also issued sovereign sukuks.
“Ever since the global financial crisis in 2007-08 there has been a sharp demand for alternative economic and business model that reduces the level of speculation as conventional model that has inherent weakness,” Najib Razak told journalists. “Over-leveraging is believed to have been the root cause of the disaster — but again, that is prohibited in Islamic finance. As a result, Islamic banks remained strongly capitalised and resilient against financial market volatility, while continuing to contribute positively to equitable and sustainable growth,” he said.

ISRA and Thomson Reuters launch joint publication on Islamic commercial law report 2016

The International Shari’ah Research Academy for Islamic Finance (ISRA) and Thomson Reuters, the world's leading provider of intelligent information for businesses and professionals today launched an inaugural joint publication on Islamic Commercial Law Report 2016.
The Islamic Commercial Law Report 2016 was launched by the Deputy Minister, Prime Minister’s Department YB Senator Dato’ Dr Asyraf Wajdi Dato’ Dusuki at the International Shari’ah Scholars Forum (ISSF), organised by ISRA and the Islamic Research and Training Institute (IRTI) in Westin Hotel, Kuala Lumpur on 3 November 2015.
The Islamic finance industry has witnessed exponential growth over the last three decades, and has become one of the fastest growing segments of the global financial industry with estimates of the current market size ranging from $1.66 trillion to $2.1 trillion. One key factor that has contributed to this progressive development is the flexible nature of Islamic commercial law, which has imbued Islamic finance with the same core characteristic of flexibility, as the legal maxim says: “the original ruling in Islamic financial transactions is permissibility”.

Islamic Bank May Support Green Sukuk for Renewables Projects

The Islamic Development Bank indicated that it may issue green sukuk bonds compliant with religious law and increase lending for climate-related projects with an announcement at the United Nations global warming conference in Paris at the end of the year.
“Estimates for the 2030 agenda indicate that we need to move from billions to trillions of dollars of support annually for sustainable development,” Savas Alpay, chief economist of the IDB, said in a phone interview. “Traditional sources of development finance will not be enough. We must also look at non-traditional sources. We will be using Islamic finance to bring new resources to the table.”
Khazanah Nasional Bhd, Malaysia’s state-owned sovereign wealth fund, issued green sukuk last November after introducing guidelines for socially responsible debt in August 2014. It was the second entity after the London-based International Financial Facility for Immunization announce plans to sell ethical-based sukuk.
Green Sukuk

Cobalt targets Sharia-compliant demand

The Islamic countries of South-East Asia represent a rich potential area of growth for insurers, especially those able to offer Sharia-compliant products, Richard Bishop, chief executive officer of Cobalt Underwriting, told SIRC Today. Bishop said that counties such as Indonesia, Malaysia and Pakistan offered a plentiful source of potential business for insurers, especially those familiar with and able to offer Sharia-compliant insurance.
Cobalt Insurance Holdings and its two specialist operations, Cobalt Underwriting Services and Cobalt Advisory Services, were formed in 2012 with the objective of establishing London as a leading global centre for Sharia-compliant insurance capacity.
“When we started we principally focused our efforts on the Middle East as a market,” Bishop said. “We do business in the UK, or inward investment into the UK via Islamic investors, but we wanted to make our product available in the Islamic markets, and the closest Islamic market to the UK is the Middle East. It’s worked quite well for us as a starter market.”

Demand for Islamic finance grew after 2008 economic crisis

Prime Minister Datuk Seri Najib Razak credited the 2008 global economic crisis, reportedly the worst since the Great Depression, for paving the way towards the growth of Islamic finance. He said the 2008 financial crisis, which was triggered by the bursting of a housing bubble in the United States and later contributed to the European sovereign-debt crisis, made alternative financial systems more sought after.
“Ever since the global economic crisis in 2007, 2008, I think there’s been a sharp demand for alternative economic and business models, specifically financial models that reduces the level of speculation. “Conventional model has that inherent weakness and more to kind of a genuine partnership, you share the risk and you share the profit. So Islamic finance has gained a lot of traction,” he said during a press conference at the 11th World Islamic Economic Forum in Kuala Lumpur here.

Tax incentives under 2016 Budget to promote SRI Sukuk timely

ax incentives under the 2016 Budget to promote Sustainable and Responsible Investment (SRI) Sukuk are timely as interest in these instruments are on the rise. The budget proposes that tax deduction be given for five years on issuance costs of SRI Sukuk. Maybank Islamic Bhd CEO Datuk Muzaffar Hisham noted that SRI Sukuk can also be the avenue for financial inclusion which has been strongly championed by the Islamic finance industry as a whole. RHB Islamic Bhd CEO and managing director Ibrahim Hassan said any project has to first be attractive to investors. The next stage will then be to choose the best funding option, and this is where the incentives for SRI Sukuk could make it a cost-effective option.

Islamic Finance: Crowdfunding to the fore

Crowdfunding is the latest buzzword to hit the financial industry. It is a form of alternative financing that has emerged outside the realm of the traditional financial system. To illustrate the rapid growth of the crowdfunding industry, such platforms raised US$89 million (RM369.6 million) in 2010, US$1.47 billion in 2011 and US$2.66 billion in 2012. Fast forward to 2014, and the total amount raised from crowdfunding had risen to US$15 billion. The amount is forecast to reach a massive US$34 billion this year. Crowdfunding will go a long way in helping the Islamic finance industry achieve one of its major goals, which is financial inclusion for all.

Guidance investments announces first closure of logistics real estate investment fund targeting GCC investors

Guidance Investments has announced the first closure of its Logistics Real Estate Investment Fund, South East Asia's first Fund focused on the logistics and industrial sectors, at USD 100 million. The first close puts the Fund in a strong position to hit its target of USD 400 million with a number of additional closings planned over the next 18 months. A Malaysian financial organization is the anchor investor of the landmark Fund. Other investors include pension funds, a supra-national institution, endowment funds and family offices from the GCC and the Middle East. The Fund has secured 3 transactions to-date, with a steady pipeline in active negotiations.

Malaysia's Royal Award for Islamic Finance calls for global nominations

Malaysia's Royal Award for Islamic Finance commenced a global search to honour an exceptional individual in the field of Islamic finance. The Royal Award, which was inaugurated in 2010 as a biennial award, is spearheaded by Bank Negara Malaysia and the Securities Commission Malaysia in support of Malaysia as an Islamic finance marketplace. The Royal Award recognises Islamic finance visionaries who contribute significantly to the growth of the global economy and social progress of communities around the world. The closing date for nomination is 14 December 2015, and interested persons and parties can submit their nomination online via the website www.theroyalaward.com.

Malaysia: Khazanah may offload holding in Bank Muamalat, ahead of merger

State investment fund Khazanah Nasional Bhd is expected to dispose off its entire 30 per cent interest in Bank Muamalat to major shareholder DRB-Hicom Bhd ahead of the proposed merger between Bank Muamalat and Malaysia Building Society Bhd (MBSB) materialises. There is no point holding on to the stake since its holdings would diminish in the merged entity. Moreover, it would not be a problem for DRB-Hicom which already owns 70 per cent interest in Bank Muamalat to purchase Khazanah’s interest. Khazanah managing director Azman Mokhtar had told reporters that it would wait for the outcome of the merger talks before deciding what to do with its stake.

Malaysia aims to boost Islamic finance with new initiatives in budget

The Malaysian government announced new incentives for "ethical" Islamic bonds and home loans in the 2016 budget which was delivered in parliament on Friday, as Prime Minister Najib Razak doled out populist incentives to shore up support. Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption when they were used to finance home purchases. Other initiatives for the Islamic finance sector will be announced later, Najib said without elaborating. Attracting private sector firms has become more important this year because the central bank has shifted away from selling its own sukuk.

Malaysia aims to boost Islamic finance with new initiatives in budget

The Malaysian government announced the new incentives for "ethical" Islamic bonds in the 2016 budget which was delivered by Prime Minister Najib Razak. The government originally introduced the concept of "ethical" sukuk to finance "sustainable and responsible investment" (SRI) in 2013. Sovereign wealth fund Khazanah sold 100 million ringgit ($23.7 million) of SRI sukuk in May this year but so far there have been no other issues. In Friday's budget, Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption in certain cases.

Khazanah to exit in Bank Muamalat merger

Khazanah Nasional Bhd plans to divest its entire 30% stake in Bank Muamalat Malaysia Bhd in the proposed merger between the lender and Malaysia Building Society Bhd (MBSB), sources say. That it plans to sell the entire 30% stake isn’t exactly surprising considering that Khazanah has long made it known that it considers the stake a “non-core holding”, which meant that it was open to letting it go at the right price. Another reason for the planned divestment is that Bank Negara Malaysia is not keen on the government investment arm owning major stakes in more than one bank. It already owns 29.34% in CIMB Group Holdings Bhd.

Maybank Islamic takes legal action against R&A over RM30.54m loan

R&A Telecommunication Group Bhd's major subsidiary, R&A Telecommunication Sdn Bhd (RASB), has been served a writ and a statement of claim by Maybank Islamic Bhd for defaulting a loan payment of RM30.54 million. R&A said it plans to address the issue via a regularisation plan. The filing of the writ and statement of claim is a result of the outstanding amount for various Islamic financing facilities granted by the plaintiff including murabahah cashlines and Islamic tradeliness facilities, R&A said. The financial of operational impact of the writ and statement of claim on the group will be severe, it said, adding that it will severely impact the group's cash position.

MALAYSIA PRESS-Malaysia's RHB Islamic set to expand into Singapore-New Straits Times

Malaysia's RHB Islamic Bank Bhd is set to launch a window in Singapore by year-end, New Straits Times reported on Monday, citing managing director and chief executive officer Ibrahim Hassan. Right now the bank is keen on Singapore and Indonesia mostly, Ibrahim was quoted as saying. Singapore because it is one of the world's most vibrant financial hubs, thus allowing RHB to tap further into capital markets and eventually Indonesia, which has the biggest Muslim population.

OCBC Al-Amin Opens First Islamic Premier Banking Centre

OCBC Al-Amin Bank Bhd has opened its first Islamic Premier Banking Centre at the newly opened branch, the 11th, at Kota Kemuning in Shah Alam. The move will cater to high net worth individuals seeking sophisticated Islamic banking products and services. With the opening of the first Islamic Premier Banking centre here in Kota Kemuning, the bank hopes to raise the bar in Islamic banking products and services for the high net worth segment. The bank's inaugural Premier Banking Centre includes a private customer discussion area, parking, safe deposit boxes and full-time premier banking tellers. Previously, the only available premier banking centres for Islamic banking were those shared with conventional banking entities.

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