This page contains a Flash digital edition of a book.
News gif Islamic finance news


Islamic Finance Yield Spreads at 2 Year Low To Spur 2011 Sales


The lowest relative yields on Islamic bonds in more than two years may revive interest amongst investors and encourage issuers to tap into the market after a 15 per cent drop in new sales in 2010. The difference between average yields for emerging-market sukuk, and the London interbank offered rate, narrowed to 282.7 basis points yesterday - the lowest since August 2008 - according to the HSBC/NAS- DAQ Dubai US Dollar Sukuk Index. Albaraka Banking Group BSC, Bahrain’s biggest pub- licly traded Islamic lender, plans to sell Is- lamic bonds during the first quarter, while Turkish Islamic bank, Albaraka Turk Katilim Bankasi AS, ,may make an offering this year, company officials said this week.


Spreads shrank in 2010 as debt restructur- ing in the Persian Gulf, together with govern- ment plans to spur investment by building roads, railways and bridges, helped to re- store the appetite for assets in the US $1 trillion Islamic finance industry. Sukuk yields will rise this year along with interest rates globally, according to Kuala Lumpur-based CIMB Principal Islamic Asset Management Bhd.


“Now’s a good time for issuers,” said Zeid Ayer, who helps oversee US $1.6 billion of Shariah-compliant assets at CIMB-Principal Islamic Asset Management, in a phone inter- view yesterday. “There’s a healthy pipeline because issuers will likely take advantage of low funding costs, and there’s expected to be more spending on infrastructure projects.” Zeid’s company is a joint venture between Principal Global Investors LLC, a Des Moines, Iowa-based firm which manages more than US $200 billion in assets globally, and Kuala Lumpur-based CIMB Group Holdings Bhd., the second biggest lender in the South East Asian country.


Albaraka Banking plans to sell as much as US $500 million of sukuk bonds after delay- ing in 2010, said Adnan Ahmed Yousif, the chief executive officer, said in a telephone interview on the 5th of January. He was speaking from Manama. Albaraka Turk Ka- tilim Bankasi may offer at least US $100 mil-


lion of notes, Chief Executive Officer Fahret- tin Yahsi said in Istanbul yesterday. Various French companies, the central bank of the Palestinian territories, and the government of Thailand have all also announced plans to borrow through Islamic debt this year. Global sales of Islamic bonds, which pay re- turns based on asset flows in order to com- ply with the religion’s ban on interest, fell to US $17.1 billion in 2010 from US $20.2 billion the previous year, according to data compiled by Bloomberg. Issuance reached a record US $31 billion in 2007.


Dubai World, one of Dubai’s three main state-owned holding companies, received approval from its creditors in October to change terms on US $24.9 billion of loans. Nakheel PJSC, a property unit of Dubai World, is seeking to delay payments on at least US $10 billion of loans and bills. The company is seeking to gain clearance from creditors holding 95 per cent of the debt by the end of March, according to a statement made on the 2nd of January.


“It’s much easier to access the market after the removal of some of the uncertainties as- sociated with debt restructurings, along with spreads tightening,” said Abdul Kadir Hus- sain, who manages US $2 billion of assets as chief executive officer of Mashreq Capital DIFC Ltd., as he was speaking from Dubai on the 5th of January. “In this environment issuance will rise.”


The spread between emerging-market sukuk and Libor narrowed by 177 basis points last year to 290 as of the 31st of December, ac- cording to the HSBC/NASDAQ Dubai US Dol- lar Sukuk Index. The Index also shows that average yields dropped by 252 basis points, or 2.52 percentage points, to 4.74 percent at the end of 2010.


Islamic Finance Gets A Boost From SGF


Islamic financial institutions (IFIs) which have been operating in the country while being are authorised by Bank Negara Ma- laysia (BNM), the central bank, and the Se- curities Commission Malaysia, the securi- ties regulator, have been given six months to comply with all requirements set out by the new Shariah governance framework


Several Malaysian financial regulators - in- cluding BNM; the Securities Commission of Malaysia (SC), the capital markets regula- tor; and the Labuan Financial Services Au- thority (Labuan FSA) the offshore regulator - have over the last decade or so spearhead- ed much-needed reforms within the Shariah advisory and compliance business. Malay- sia remains the only national jurisdiction in


2011 February Global Islamic Finance 7


(SGF) for Islamic financial institutions. The SGF was introduced by Malaysia late last year and became effective on the 1st of January. According to Bank Negara, by the end of June 2011 each authorized IFI operating in Malaysia is required to confirm its status of compliance with the framework. This frame- work was adopted pursuant to section 59 of the Central Bank of Malaysia Act 2009, section 53A of the Islamic Banking Act (IBA), section 69 of the Takaful Act (TA), section 126 of the Banking & Financial Institutions Act (BAFIA) and section 126 of the Develop- ment Finance Institutions Act (DFIA).


The SGF, which sets out the Shariah gov- ernance process for the Malaysian Islamic fi- nance industry,y is unique as the most com- prehensive legislation and set of guidelines in the world. It supersedes the guidelines on the governance of Shariah IFI committees introduced by Bank Negara in 2004, which outlined the role, duties and responsibilities of the Shariah committee and its members, and the relationship and working arrange- ment between Shariah committees of indi- vidual institutions and the national BNM’s Shariah Advisory Council (SAC).


According to the Malaysian central bank, the primary objective of the SGF is to enhance “the role of the board, the Shariah Com- mittee and the management in relation to Shariah matters, including enhancing the relevant key organs that have the responsi- bility to execute Shariah compliance and re- search functions aimed at the attainment of a Shariah-based operating environment.”


The SGF is effectively the next component of Malaysia’s Islamic Finance Master Plan, and is part of BNM’s on-going review of policy re- lating to the Shariah governance processes at IFIs in Malaysia.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88