IslamicFinance.de

State-owned Islamic Bank of Thailand made an unaudited profit of 2.7 billion baht ($82.4 million) last year, compared to a loss of 13.25 billion baht a year earlier. Non-performing loans were cut by more than 20 billion baht last year, with about 27 billion baht of NPLs left on its balance sheet. Management now aims to increase capital levels to comply with regulatory requirements. The bank faced several problems in 2013 which affected its image and clients' confidence, leading to a liquidity crisis. The bank, rated BBB- by Fitch, now plans to increase loans by 20 billion baht, focusing on small and medium-sized businesses and retail clients, while growing deposits by about 25 billion baht in 2014. It maintains plans to issue sukuk this year to support expansion plans.

Bank Islam Malaysia expects a 20% year-on-year growth for its financing assets this year led by its retail financing business with demand for individual and housing credit. Bank Islam will also focuse on growing its fee-based income which had been very encouraging in the recent period. Cost is a major concern for banks. There has been some softening in loan demand. Bank Islam has originally been concentrating more on owner-occupied houses rather than speculation-based buying. The bank is planning to open at least five new branches in Malaysia by the end of this year with the first one being in Kelantan. Currently, the bank has 133 branches and a total retail deposit of about RM8 billion.

Bank Muamalat Malaysia expects financing for small and medium enterprises (SMEs) to contribute between 15% and 20% of its total financial portfolio for 2014. CEO Mohd Redza Shah Abdul Wahid said this will represent up to RM1.2 billion of its loans. He said the bank’s loan growth for the consumer segment was 18%, however, it was reduced to 12% this year. This is due to the bank's consumer segment softening after Bank Negara Malaysia’s (BNM) measures especially on home financing and personal financing. Besides, Bank Muamalat signed a MoU with Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry (KLSICCI) and Kuala Lumpur Malay Chamber of Commerce (KLMCC). It will help the institution to increase its customer base for SME financing.

For many years we see in the media experts believing in inflation and even hyper inflation. However, in the same time we face proponents warning against deflation. So far we all noticed.

Only a about a week ago I read an article by Myret Zaki clarifying that unfortunately inflation and deflation co-exists.

Myret Zaki's thesis is that we face inflation on financial markets, and deflation in the real economy (in French):

http://www.bilan.ch/myret-zaki/redaction-bilan/inflation-et-deflation-co...

In my view there is a general major shift in the price matrix and I still try to figure the magnitude and implications thereof. It is a bit irritating as at University we learned about neutrality of money:

http://en.wikipedia.org/wiki/Neutrality_of_money

This means any extra supply will increase prices equally, 5 % more money, all prices going up 5 %. Pretty plausible at first hand. However, it seems it does not work in reality any more (or never did).

PT Bank Muamalat Indonesia, the second-largest sharia lender in the country, secured a loan commitment of $90 million from a commercial bank in Malaysia and an international financial institution based in Washington, reported Bisnis Indonesia. The loan has a tenure of 5-7 years and will be used for new financing in 2014 that is expected to reach 41.7 trillion rupiah ($3.43 billion), said Finance Director Hendiarto.

The International Islamic Liquidity Management expanded its sukuk issuance programme today by auctioning US$860 million (RM2.85 billion) of three-month Islamic bonds at a yield of 0.55635 per cent. The issue brings the total amount of the IILM’s outstanding sukuk to US$1.35 billion. Its programme, launched last year, envisages issuance increasing eventually to as much as US$2 billion. The newest issue was sold to nine primary dealers from Asia, the Middle East and Europe. Since the programme’s launch, primary dealers have held on to the IILM instruments after auctions and there has been little if any secondary market trade in them.

Malaysia’s Islamic bond yield rose at its first sale of the debt in 2014 as the Federal Reserve’s stimulus cuts push up global borrowing costs. The April 2019 notes, a reissue of sukuk originally sold in October, yielded 3.953 percent, compared with 3.91 percent in the secondary market. The rate on the existing securities has since climbed to 3.97 percent, the highest level since Jan. 6. While yields climbed, today’s 3.5 billion ringgit ($1.1 billion) offering still attracted orders of 1.96 times, the highest ratio since September. Malaysia plans to hold 28 bond sales this year, including 12 for Shariah-compliant securities and 16 for non-Islamic notes.

Assets held by the takaful sector in Brunei recently have grown significantly while those of conventional types of insurance have been declining, the monthly report from Brunei's monetary authority AMBD showed. In the year ended Sept. 30, takaful assets rose 21 percent to 425 million Brunei dollars ($336 million). Conventional insurers saw a drop of 1.3 percent in assets during the same 12-month period. At end-September, Brunei's takaful market accounted for 33 percent of total insurance assets. Although insurance assets have seen rapid growth in Brunei in the past decade, industry players say there is still poor awareness about insurance among its population. Brunei has four takaful operators.

DRB–Hicom has yet to finalise the new party for its divestment of a 30 per cent stake in its banking unit, Bank Muamalat Malaysia. The dilution of the stake in the country’s third largest Islamic lender has been a prolonged process as the conglomerate is looking into a strategic partnership or an exercise that could add value and increase the bank’s penetration into the Islamic financial business in Malaysia. It was reported earlier that Bank Negara Malaysia (BNM) had mandated DRB-Hicom to dilute some of its 70 per cent stake in Bank Muamalat. It was also reported that DRB-Hicom had negotiated with Affin Holdings on a potential acquisition but talks were called off due to pricing issues. The bank remains sidelined as it currently has no new products to introduce or new branches to launch.

The US Federal Reserve will likely continue trimming its asset purchases by $10bn a month – from $85bn a month – until it stops altogether later this year.This will mean that historically low interest rates and fixed income yields could rise as the globe’s economies start to recover and inflation kicks in. Borrowers want to lock in those low rates now and this means a rush to issue. Data from Bloomberg show that planned Sukuk sales in Malaysia for January are already double those for the whole of January 2013. Corporates have announced $1.7bn in Sukuk compared to the $700m total sold in January last year. Depending on what happens to interest rates, global Sukuk issuance volumes seem likely to wane as rates rise and the cost of borrowing increases. The other major fear is that the China debt bubble will burst and send shockwaves through the world’s economies with the epicentre on South East Asia.

The South China Sea reportedly holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas; some experts estimate even more. Unfortunately, there's no clear way to define who "owns" these resources, as China, Vietnam, Malaysia, Taiwan, the Philippines, Indonesia and Brunei all believe some, or all, of these resources belong to them. Many of these countries are forced to import a considerable percentage of their overall demand. Investors need to keep an eye on Southeast Asia, and the South China Sea in particular. The oil in place under that sea, as well as its importance as a trade route, could push some nations to the boiling point as they rush to secure their supply of oil. That's a catalyst for some stocks, while a big risk for others.

The Islamic Development Bank (IDB) is considering developing an Islamic Centre of Excellence at the Tun Razak Exchange in the greater Kuala Lumpur in three to five years. The centre of excellence will reportedly provide services in Islamic finance and banking-related transactions. The project will be developed in collaboration with the Malaysian government.

Essel Finance is planning a Shariah fund for foreign investors in real estate. The Shariah fund will have a corpus of $100 million (Rs 620 crore). The fund is looking to close the fund forge partnerships with Shariah funds by February-March. Amit Goenka, chief executive officer, Essel Financial Services said the Shariah partner would offer the fund on its behalf and once the company gets its licence for the offshore fund it was planning, it would bring the Shariah component under its fold. Essel's offshore vehicle may also get its investors to directly invest in real estate projects here and not route it through the fund. The offshore fund has planned a corpus of $200 million. Its domestic fund does debt deals and charges developers with coupon rates of 18 to 19 per cent.

The infrastructure projects to be launched in Asean and the Middle East and North Africa (Mena) regions will continue to put Malaysia as the champion in the sukuk market next year, according to CIMB Islamic Bank. Its Executive Director and Chief Executive Officer Badlisyah Abdul Ghani said the sukuk market will perform positively in 2014, with a projection of between US$42bil (US$1=RM3.25) and US$48bil of new issuances led by Malaysia and Saudi Arabia. CIMB Islamic has so far topped the lead manager league table after arranging RM9.70bil worth of sukuk issuance, garnering a 25.9% market share. Out of 20 countries worldwide, Malaysia was ranked third in terms of total Shariah-compliant assets at US$196.820mil, with 41 institutions offering Shariah services, representing 63.7% of the total population.

U.S.-based MetLife will buy 51% stake and 49% stake in AmLife Insurance Berhad (AmLife) and AmFamily Takaful Berhad (AmTakaful), respectively, from Malaysia’s AMMB Holdings. The remaining parts of the firms will be owned by AMMB. The deal, worth $249 million, will help MetLife to expande its reach into the Southeast Asia insurance markets. The proposed transaction follows recent announcements from New York-based MetLife of the formation of a joint venture with Bank for Investment and Development of Vietnam and opening of a representative office in Myanmar. The deal is subject to regulatory approval.

Indonesia's central bank estimates growth of Islamic banking assets will slow next year due to rising pressure from trade deficits and a depreciation in the rupiah. The country's authorities now plan to introduce an array of policies to develop the sector, ranging from regulating foreign exchange markets, introducing Islamic repurchase agreements as well as education and promotion initiatives. The central bank said a tighter policy in finance-to-deposit ratio, similar to the loan-to-deposit (LDR) ratio used for conventional banks, and developing a sharia-compliant lender of last resort (LOLR) would be needed to support the stability of the financial system.

Bangladesh’s credit rating might deteriorate as well as the LC confirmation cost would rise further. This is because two local private commercial banks Prime Bank and Dutch Bangla Bank allegedly failed to repay the loans (not more than US$2 million only) from the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC). Local commercial banks are now unable to repay the loans against local and foreign LCs due to stagnated business activities amid political deadlock ahead of the general election and prolonged violence. LC confirmation cost will be increased unless the local banks maintain the standard credit rating of the commercial banks.

Indonesia plans a new law that will require the spin-off of the sharia-compliant units of insurance companies. The move could reshape Indonesia's takaful market by spurring mergers as firms try to meet capital requirements for their full-fledged Islamic units. A draft law is now with parliament but won't be enacted this year as previously anticipated. It covers all areas - licensing, market conduct, corporate governance, consumer protection - for both takaful and non-takaful firms. The law is expected to give three years for insurers to comply with requirements to spin-off their Islamic units. Minimum capital requirements for full-fledged takaful firms would be set at 50 billion rupiah , compared with 100 billion rupiah for conventional insurers. Passing Indonesia's insurance law would close the last market that allows takaful windows to operate, helping develop the country's nascent Islamic finance market.

The global Islamic financial industry is expected to grow to US$2 trillion next year from US$1.3 trillion currently, propped up by growing demand from non-conservative countries, Malaysia's Deputy Finance Minister Ahmad Maslan said. The Islamic financial industry will expand because of the stability of the Islamic financial system. The system is not shaken by the economic downturn anywhere in the world, he added. Furthermore, the Islamic financial system was also fairer such as in terms of profit distribution, Ahmad said. In Malaysia, the growth of Islamic Finance would benefit both Muslims and and non-Muslim consumers, he said.

The Kuala Lumpur-based Islamic Financial Services Board (IFSB) has published guidelines on capital adequacy for Islamic banks and risk management of takaful as the industry body expands its activity and membership base. Revised guidelines detail criteria for using sukuk as Tier 1 and Tier 2 regulatory capital, those for takaful firms outline issues faced by Islamic insurers, including the risk that their products become non-compliant with Shariah principles, and describe best practices to supervise their funds and disclose information. Work now shifts to the IFSB’s 16th guideline covering the supervision of Islamic finance institutions, helping tighten regulatory oversight of industry practices. The IFSB council will be chaired in 2014 by the managing director of Brunei’s monetary authority, taking over duties from the Qatar’s central bank governor.