IslamicFinance.de

A group of British Islamic banks and government bodies launched on Wednesday a lobby group to further the industry's development and push for the issuance of the first UK sovereign Islamic bond. The UK Islamic Finance Secretariat will incorporate Islamic finance experts currently operating within committees of government organisations such as the UKTI, the government's international business development organisation, the Treasury and the Financial Services Authority (FSA), to strengthen the UK's position as an Islamic finance hub.

The United Kingdom government is deciding to issue sukuk which would:

* Diversify its investor base- not a bad prospect for an indebted country- standing a chance to attract further liquidity.

* Show it is not complacent and really means business creating a benchmark in Europe, where no significant sukuk issuance occurred, excluding a 100 million euro issuance in 2004 in German region Sachsen-Anhalt. Pre-crisis rumours had it that the UK would issue sukuk worth £2 billion in short term notes making a real statement about its Islamic finance ambitions.

* Provide help to the five stand alone Islamic banks, which are required by the market regulator to put in place liquidity buffers, consisting of government bonds or cash. Because there is no sovereign sukuk, these shining monuments to London’s superiority in Islamic finance depend on debt issued by the Islamic Development Bank.

* Encourage corporate sukuk issuance, which is not too probable without the government leading by example.

Bank of London and the Middle East (BLME), has delayed one global equity tracker and one emerging markets equities fund as the financial crisis constrains clients in the Middle East according to the CEO, reported Cecilia Valente and Daryl Loo on Reuters. One fund which has been delayed but is now poised to launch later this year with $70 million will aim to exploit a niche market for office space for doctors in the United States. BLME has also raised GBP 50 mn from an institutional investor for a UK property fund and plans to raise GBP 20 mn by June for a pooled UK property fund.

Cecilia Valente and Frederik Richter reported 10 February on Reuters, that Western companies, especially in the UK and France, are considering issuing Sukuk to tap Middle Eastern investors.

Reuters reported on 7 January that the Dubai Multi Commodities Centre Authority (DMCC) and Shariah Capital launched an index tracking the performance of Islamic hedge funds investing in commodities.The index performance will be calculated and reported by Thomson Reuters (TRI.TO). The index is based on four hedge funds, part of the DSAM Kauthar Commodity Fund and investing in gold, energy, natural resources and mining. Each fund has received start capital of $50 million from the DMCC.

Guardian reported based on Reuters on 7 January that market volatility wiped out all of the asset gains made by the Islamic fund management industry in the year to September 2008, citing US-based research and data provider Cerulli Associates. Sharia-compliant fund managers had assets of USD 65 bn at the end of the 3rd quarter 2008, including assets managed via discretionary mandates for institutions and high net-worth individuals and mutual funds. Assets invested in Islamic-compliant mutual funds rose by 50 % while the number of such funds doubled in the three years to 2008. Islamic mutual funds alone accounted for USD 35 bn-- up from USD 23.2 bn gathered in 2005. Sukuk funds remained a rare offering. Once markets stabilise this industry can potentially expand at a rate of above 10 % a year, the report said. Saudi Arabia is currently the largest domestic market for shariah investments. Challenges named in a poll by Cerulli were named the Sharia compliance costs, convincing investors of the Sharia compliance, the discrepancy in Sharia standards and the lack of 3rd party distribution.

Report order form: http://www.cerulli.com/pdfs/2008_Shariah_Info_Packet.pdf

Cecilia Valente and Selcuk Gokoluk reported on 7 January on Reuters that the Sukuk planned by the Turkish government, finds potential buyers in Turkey's institutional investors like Oyak Emeklilik or AK Portfolio. On average, Turkish pension schemes allocate more than 70 percent of their assets to government bonds, with the rest in shares, repo or bank deposits.