IslamicFinance.de

Asya Katilim Bankasi AS (ASYAB), the Istanbul-based lender caught in a feud between the government and an Islamic movement, fell to its lowest in more than three weeks as Turkish Airlines (THYAO) said it was no longer using the bank. THYAO didn't say where it had transferred its deposits. As a result, Bank Asya’s shares declined 4.1 percent at 12:24 p.m. in Istanbul. The market may be concerned that Turkish Airlines removing deposits may have a negative impact on the funding structure of the bank. However, it was known in the market that THY took out large deposits before, so the market’s probably overreacting at the moment. The bank has lost 41 percent since Dec. 16, and its price-to-book ratio of 0.43 is the lowest in an index of 16 listed Turkish lenders.

Growth in Asia’s foreign-currency sukuk issuance is being hindered by capital controls, leaving the Persian Gulf dominating a market that exceeded $17 billion in the past two years. Malaysia’s central bank requires local companies seeking to sell overseas bonds to show a legitimate funding need to reduce currency speculation. In Indonesia, corporations must supply information on the potential foreign-exchange risk, whether they intend to hedge, as well as their dollar and rupiah cash flows under rules put in place by the Financial Services Authority in 2002. This is because Malaysia and Indonesia want to protect their reputation and ensure that issuers won’t default on foreign-currency debt.

Persian Gulf government spending will help drive what may be a record year for Islamic bond sales, Fitch Ratings said, echoing HSBC Holdings Plc (HSBA) forecasts. Sales will probably match the 2012 high, the rating company said. Economic growth in the oil-rich Gulf Cooperation Council countries and possible debut Islamic debt sales from the U.K. and Hong Kong will help the long-term outlook for sukuk sales, Fitch said. Qatar’s plans for the 2022 soccer world cup, Dubai’s preparations for the Expo world fair in 2020, and Saudi Arabia and Abu Dhabi’s spending commitments should boost issuance, according to the rating company.

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.