Ifg weekly briefing (2)


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Ifg weekly briefing (2)

  1. 1. WEEKLY BRIEFING Issue 47 | Sunday, August 25, 2013 FEATURE A third Islamic bank, another step forward for Tunisia By Blake Goud / IFG PORTLAND | Sat, Aug 24 ` INSIDE THIS ISSUE Smart tech and citizen vigilance to root out fake halal labels ....... 3 A third Islamic bank, another step forward for Tunisia ................. 4 Meezan plans Pakistan‘s first airtime sukuk in Q4 ....................... 6 EXCLUSIVE-SocGen plans $300 mln sukuk programme in Malaysia-sources......................................................................... 7 Oman Development Bank considers Islamic window................... 9 STOCKS NEWS MIDEAST-Individual speculators to dominate Gulf ........................................................................................... 10 FOREX-Dollar slides after disappointing U.S. housing data ...... 11 Dutch lender Rabobank tots up likely costs of Libor scandal ..... 12 Source: Thomson Reuters EIKON - Indices Guide <Indices> The Arab Spring has had a potentially lasting impact through the development of Islamic finance in North Africa. In Egypt, the sukuk law passed under the Morsi government is set to be implemented, even if the timeline is unclear. In Tunisia Islamic banking market development seems to have more support as detailed in a Thomson Reuters Zawya report. Since that report was released (in June), the market acceptance for Islamic banking was further demonstrated with the recent application and proposed capital increase of El Wifack Leasing to become the country‘s third fully Islamic bank. The application of El Wifack to undergo a conversion to an Islamic bank demonstrates a different strategy for Islamic finance in Tunisia compared with neighboring Libya and Oman, which opened to Islamic banks this year. In Libya, there is significant interest from Gulf-based Islamic banks who are considering entering the market through acquisition. 0.4 0.6 0.8 1 1.2 1.4 0.4 0.6 0.8 1.0 1.2 1.4 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 IIBR Vs. LIBOR, (USD 6 month) 6 Month USD IIBR 6 Month USD LIBOR In Oman, the development is through new standalone Islamic banks as well as Islamic windows of conventional banks, a strategy that is further supported with the decision by the Oman Development Bank to open an Islamic window rather than convert fully into an Islamic bank. - Continued on Page 4- 100 103 105 108 110 100 103 105 108 110 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Global Sukuk and Bond Indices DJ Sukuk Index Thomson Reuters Global Sukuk Index
  2. 2. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 2  UPDATE 3-Arabtec eyes merger to create Gulf's biggest builder-RTRS  Is Indonesia trying to plug the currency hole with debt? - RTRS  India central bank allows non-bank Islamic finance firm - RTRS  Analysis - Egypt's rulers can count on Gulf aid despite bloodshed - RTRS  MANDATE: Malaysia Airports hires 4 for MYR500m sukuk - IFR  UPDATE: Expectations rise on Turkey sukuk* - RTRS  Islamic Development Bank, Saudi Fund provides finances amounting to $ 21.7 billion for 90 projects-WAM-Zawya  Analysis: Sovereign funds' fortunes turn as emerging assets sour - RTRS  Turkish lira hits record low on capital outflow fears - RTRS  Bank Muamalat Malaysia Courts Merger, Bank Rakyat And MIDF Among Possible Candidates On Its List Malaysian Digest  Islamic countries to inject fresh capital into Bosnian bank - Dalje  Research forecasts mixed outlook for GCC markets – Gulf News - Zawya  Analysis: With Gulf aid, Egypt economy can limp through crisis - RTRS  WRAPUP 1-Emerging markets' selloff deepens on fear of Fed fallout - RTRS  Bahrain's Arcapita sells 3PD Holding to XPO Logistics - RTRS  Qatar government spending growth slows sharply in 2012/13 - RTRS  Update-Moody's: Oman's robust growth outlook and sound fiscal metrics support creditworthiness – RTRS*  Abu Dhabi's Mubadala unit to develop oil field in Thailand - RTRS  Meethaq Shari'a Board reviews new Islamic products - Zawya  GCC insurance industry on growth path - Gulf News  UAE banks lending at their fastest rate in two years – The National  UAE investors: ‗Compensate us for cancelled projects‘ - Gulf News  Changes ahead for the Dubai property market – Hadef & Partners - Zawya WATCH LIST  RPT-Fitch Rates Indonesia's Proposed PPSI-III Sukuk 'BBB- (EXP)'-RTRS RPT-Malaysia Maybank's Q2 net profit rises 9 pct-RTRS  Alizz Islamic Bank geared up to unveil financial products – Times of Oman  MOVES-Dubai's Arabtec hires former Aldar chief executive - RTRS *This service is only available to EIKON users, click here to register Arabtec logos are seen on buildings under construction in the Marina area of Dubai in this picture taken November 28, 2009. CEO says considering merger with Saudi, Kuwait contractors. Merger would create region's largest construction company. Arabtec shares rise 3.9 pct in Dubai REUTERS/Steve Crisp NEWS WRAP UP CALENDAR OF EVENTS MONDAY, AUGUST 26 - 27 MALAYSIA - IFSB-INCEIF Executive Forum MONDAY, AUGUST 26 - 29 MALAYSIA - Islamic Markets Programme: Widening Market Connectivity in Islamic Finance TUESDAY, AUGUST 27 MALAYSIA - Malaysia In–House Legal Summit 2013 TUESDAY, AUGUST 27 PAKISTAN - IFN Roadshow 2013 Pakistan THURSDAY, AUGUST 29 SRI LANKA - IFN Roadshow 2013 Sri Lanka  Affin confident of 15% return – Malaysian Reserve  CORRECTED-UPDATE 1-RLPC-Bahrain Investcorp sells Skrill to CVC Capital for 600 mln euros  Text-MARC withdraws its rating on Putrajaya Holdings Sdn Bhd – RTRS*  UPDATE 1-Saudi Electricity to replace CEO with Aramco executive - RTRS - Zawya  RPT-Indonesia posts wider current a/c deficit in Q2, 4.4 pct of GDP - RTRS
  3. 3. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 3 Contact details IFG Briefing Analyst Team Ameena Al Haddad Ammar Radhi Karim Arafa Redha Al Ansari Shaima Hasan Yusuf Radhi Emmy Abdul Alim (Editor) Community Specialist Team Blake Goud (Community Leader) Duaa Al Masqati Noor Khamdan Telephone +973 1750 2020 Subscription and feedback To subscribe to the Community & Briefings Click Here Already a Community member? Join the Discussion Download RM Web-based RM For any Feedback or Suggestions please contact the IFG Analyst Team For most consumers seeking halal products, they have to trust the retailer to sell only food with bona fide halal certificates to guarantee their halal-ness. But not all retailers do that; in Indonesia, data released by the Food and Drug Monitoring Agency in 2011 showed that only a third of the halal products in the overwhelmingly Muslim-dominant country were backed by official halal certificates. The situation is not dissimilar in Malaysia, where the Consumer Protection and Welfare Board recently asked the country‘s Islamic Development Department (JAKIM) to increase monitoring of the products being sold as halal in supermarkets. The Consumer Protection Board found that certain foods with the halal label were not actually approved by JAKIM. The suggestion for greater monitoring by a government body is a seemingly common sense response to failures of a government-sponsored certification program, but with finite resources, it is not always possible to accomplish and sustain. One of the important developments of the past few years is the rapid proliferation of smart phones that has led to ‗crowdsourcing‘ where a vast number of consumers replaces or supplements a specialist organization that used to be responsible on its own. Think of the impact of citizen journalists working on Twitter to deliver news faster and with more details than from the newspapers and TV stations that previously dominated. It doesn‘t mean that newspapers—or in the case of halal monitoring, regulatory organizations—are destined to be replaced by the ‗crowd‘, but it does mean they should adapt and more aggressively use the tools at their disposal to accomplish their mission. For an organization like JAKIM, it should recruit Muslim consumers who value being able to trust that products on the shelf at their supermarkets labeled as halal are certified as such. During the manufacturing process, the products and their supply chain and logistics that get them from the suppliers to the distributors to the consumers will not allow for contamination and this information is collected by the certification organization. In some cases, it is organized together in a form that can be read through a matrix barcode such as the Quick Response (QR) code on the packaging by anyone with a smart phone, like a solution that was developed by the Halal Science Center at Chulalongkorn University in Thailand (pdf). Similar mobile technology for verifying the certification of halal products is used by a Swedish company and is under development by JAKIM itself (the MyHalalTrace system). Certification and monitoring by supervisory bodies is important, but it should be supplemented wherever possible to expand its reach by using consumers and the technology whose reach is spreading to identify the most significant areas for organizations like JAKIM to focus their limited resources to ensure that only halal certified products can be sold as being halal. (Issues such as this one will be tackled at the Global Islamic Economy Summit, organized by Thomson Reuters and the Dubai Chamber of Commerce, to be held in Dubai November 25-26, 2013. For more information on the summit and to connect on social media, please visit the Summit website: http://www.globalislamiceconomy.com/) COMMUNITY Smart tech and citizen vigilance to root out fake halal labels By Blake Goud / IFG PORTLAND | Sat, Aug 24 Facebook Twitter LinkedIn
  4. 4. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 4 FEATURE A third Islamic bank, another step forward for Tunisia By Blake Goud / IFG PORTLAND | Sat, Aug 24 - Continued from Page 1 – State of Islamic banking in Tunisia In Tunisia, the longest standing Islamic bank is Al Baraka Bank, which holds an offshore banking license while Zitouna Bank is currently the only domestic Islamic bank, having been founded in October 2009 and currently owned by the central bank with the Islamic Development Bank (IDB) recently acquiring a 25% stake. In addition, UAE‘s Noor Islamic Bank opened a representative office in the country in 2008 but has not expanded further. The most recent development by El Wifack provides forward looking information about the potential of the market relative to the conventional market, which contrasts with the historical trend. Al Baraka Tunisia‘s financial statements between 2005 and 2011 (the most recently available), shows annualized growth in total assets of 16%. The growth in receivables from Islamic finance was 15% annually while on the liability side, deposits grew at a slightly quicker 17%. The financing mix was similar to other Islamic banks— dominated by murabaha, ijara and tawarruq. When the assets of Zitouna Bank are added, the two banks represent 2.5% of the total banking sector. During the pre-financial crisis period, despite limitations as a result of its offshore banking license, Al Baraka kept pace with the rest of the banking sector with market share holding at 1% to 2% of the banking system. With the post-revolution transition where the government is now more supportive of Islamic banking, there is potential for further growth and it is likely to be driven in large part by the new entrants who will likely see their growth driven first by their ability to attract deposits. The survey conducted by Thomson Reuters Zawya found that a large proportion of consumers are unhappy with their current financial institution and nearly half of those not currently using an Islamic bank would consider switching. Development of sukuk market and liquidity management There are two areas where the government, which recently passed a law permitting sukuk, can provide the most assistance: sukuk, and liquidity management. They are likely to get assistance on both from international organizations. On the sukuk front, the growth in Islamic banks is likely to be driven first by a shift into deposits as the economy remains constrained by political instability and a slow recovery in Europe, which accounts for the country‘s largest export market. The sukuk would allow the government to raise funds, but also provide a safe asset for the Islamic banks to invest deposits in excess of that used to provide customer financing. The Tunisian prime minister‘s office has said that the IDB‘s Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) will provide up to $600 million in insurance for a sukuk offering through its sukuk insurance program. This should provide encouragement for the government but may also lead to greater international investor demand at the expense of domestic Islamic banks (for whom the insurance would be not as valuable because should the government default they will have greater problems than losses on sovereign sukuk). When the government is considering its sukuk, it should consider an ICIEC guaranteed hard currency issue for international investors and a local currency sukuk targeted at domestic Islamic banks. The other area is liquidity management, which will be less of a problem with one additional Islamic bank provided El Wifack‘s application is accepted. It will also be less of a challenge than in Oman where tawarruq is prohibited, which deprives Islamic banks the opportunity to participate in money market transactions with conventional banks. The International Islamic Liquidity Management Corporation‘s (IILM) sukuk programme would be of assistance to Tunisia‘s Islamic banks, but a local currency money market will still be required and Islamic banks in Tunisia are likely to have to compete for allocations. An alternative would be to follow a possibility covered in Nigeria‘s Islamic banking laws that would use IILM sukuk as collateral for domestic sukuk. This could be done with a local currency sukuk- backed sukuk that uses IILM sukuk as collateral which would be issued by the central bank who could either retain the currency risk (which would see their local currency sukuk liabilities decline in value relative to the USD-denominated collateral) or could hedge away using sharia-compliant currency hedging. With the potential growth in Islamic banking in Tunisia—the Thomson Reuters Zawya report suggests potential growth to reach 25-40% of total banking assets in the next 5 years—the government should provide assistance to facilitate the strengthening of the industry today to be in a position to benefit when the political risk declines and the export markets in Europe see further economic growth following the continent‘s recent exit from recession driven by France and Germany who together account for 40% of Tunisia‘s exports. Zitouna Bank AlBaraka Bank Number of Branches 32 8 Commenced Operations 28-May-10 1983 Capital $50 million 70 million TND ($45 million) Ownership Zitouna Bank was placed under the supervision and control of the Central Bank of Tunisia (BCT) 87% owned by the government, the rest owned by private companies 2011 Results Total Assets, Thousand USD 325,946 592,331 Total Liabilities, Thousand USD 289,564 497,874 Operating Income, Thousand USD 15,497 27,125 Net Income (Loss) (511) 8,699 Source: Tunisia 2013 Islamic Finance Country Report
  5. 5. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 5 SUKUK REVIEW Sukuk Market Overview State-owned Syarikat Prasarana Negara Bhd has sold Islamic bonds or sukuk worth 1 billion ringgit ($303 million) to fund extending the country's public transport network. The sukuk consists of a 10-year tranche with a semi-annual yield of 4.26 percent and a 15-year tranche at 4.58 percent annually. The tranches were oversubscribed 3.27 times and 3.1 times respectively. Prasarana said in a statement on Thursday that bookbuilding and sale of the sukuk were "well-executed" despite a challenging market and working within a short time frame. The government- guaranteed sukuk is arranged by AmInvestment Bank Bhd and CIMB Investment Bank Bhd, while HSBC Amanah Bhd and RHB Investment Bank Bhd are lead managers and joint bookrunners. Malaysia's outstanding sukuk stood at $41.5 billion as of July 2013, accounting for around 68 percent of the global market. - RTRS Thu, 22 Aug The Republic of Indonesia (Baa3/BB+/BBB-) will meet investors with Citigroup, Deutsche Bank, and Standard Chartered Bank for investor meetings in relation with a 144 A/Reg S sukuk bonds. Investor meetings will start on Friday in London. The republic had priced a USD1bn global back in June with a tenor of 10.25 years. The issue paid a coupon of 5.375% and priced at 99.391 for a yield of 5.45% - a full 100bp more than the 3.375% coupon it had paid on a US$1.5bn 10-year bond as recently as April, its lowest print of all time on a conventional bond at that tenor. RTRS* Wed, 21 Aug RAM Ratings has assigned a preliminary long-term rating of AA2, with a stable outlook, to Bright Focus Berhad’s (―Bright Focus‖ or ―the Group‖) proposed Islamic Securities of up to RM1.35 billion (―proposed Sukuk‖). Bright Focus owns 96.8% of Maju Expressway Sdn Bhd (―MESB‖ or ―the Company‖) - the concessionaire of the 26- km Maju Expressway (―MEX‖ or ―the Highway‖). As the repayment of the proposed Sukuk relies solely on cashflow from MESB, the preliminary rating reflects the strong project economics and robust financial profile of the Company, supported by the covenants under the transaction structure. The Highway offers a direct link between the commercial centre of Kuala Lumpur and Putrajaya and Cyberjaya. Since tolling commenced in 2008, the Highway‘s traffic volume has notched up a compounded annual growth rate of 20%, with average daily traffic at its 2 toll plazas reaching 100,000 vehicles in 2012. RAM Tue, 20 Aug The Turkish Treasury said on Tuesday it had issued 1.817 billion lira ($930 million) worth of lira-denominated lease certificates, or sukuk, to diversify borrowing instruments, broaden the investor base and increase domestic savings. It met total demand from investors for the sukuk which has a maturity of August 19, 2015, the treasury said on its web site. RTRS* Tue, 20 Aug Indonesia raised 1.54 trillion rupiah ($146.81 million) in sharia bonds at an auction on Tuesday, slightly above an indicative target of 1.5 trillion rupiah despite market turnmoil, the finance ministry's debt office said. Yields for 6-month sharia T-bills and 30-year project-based sukuk were higher than the previous auction on July 23. The G20 economy sold 900 billion rupiah of 6-month sharia T-bills and 640 billion rupiah of 30-year project-based sukuk. Total bids were 11.145 trillion rupiah and the highest bid-to-cover ratio was 11.06 for 6-month T- bills. Foreign holdings in sukuk were 7.12 percent as of Aug. 16, down from 7.36 percent at end-June as the market suffered from a heavy sell-off. RTRS* Tue, 20 Aug Moody's Investors Service, has assigned a long-term (P)Baa3 rating to the proposed US dollar trust certificates to be issued by Perusahaan Penerbit SBSN Indonesia III ("PPSI III"). The payment obligations associated with these certificates are direct obligations of the Government of Indonesia. The outlook is stable. In Moody's opinion, the payment obligations represented by the securities to be issued by PPSI III are ranked pari passu with other senior, unsecured debt issuances of the Government of Indonesia. As such, Moody's (P)Baa3 rating to the proposed sukuk issuance is in line with the Government of Indonesia's Baa3 issuer rating and stable outlook given that any direct government obligation whose repayment is handled by the Government of Indonesia receives a rating equivalent to that of the government.. Moody‘s Wed, 21 Aug Source: Thomson Reuters EIKON CDS <REUTERSCDS> *This service is only available to EIKON users, click here to register Credit Default Swaps 100 200 300 400 500 600 700 800 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Bahrain Egypt Dubai Indonesia 60 80 100 120 140 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Saudi Qatar Malaysia Abu Dhabi
  6. 6. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 6 Pakistan's Meezan Bank plans to arrange the country's first airtime- based sukuk (Islamic bond), a format favoured by telecommunications operators wishing to tap liquidity in the Islamic capital markets. The local-currency issuance would have a tenor of between five and 10 years and an approximate size of 7 billion rupees ($68.5 million), said Suleman Muhammad Ali, vice president of product development and sharia compliance at Meezan. The sukuk would be issued in the fourth quarter of this year. Ali did not name the issuer. Sukuk that use intangible assets such as minutes of mobile telephone use have been tested elsewhere, allowing firms with limited physical assets to raise cash via Islamic finance, which follows religious principles such as bans on interest and gambling. "The structure is based on ijara and sub-ijara of services. Assets are airtime (minutes) represented by prepaid calling cards and identified by the serial number of each card," Ali said. In an Islamic ijara deal, one party leases an asset to a client for an agreed price; unlike a conventional lease, the structure does not allow a lessor to charge interest on defaulted or delayed payments. PIPELINE ISSUE Meezan plans Pakistan's first airtime sukuk in Q4 By Bernardo Vizcaino / REUTERS DUBAI | Wed, Aug 21 INTERNATIONAL SUKUK WEEK TOP GAINERS* INTERNATIONAL SUKUK WEEK TOP LOSERS* NAME CURRENCY BID ASK MATURITY DATE YIELD TO MATURITY LAST WEEK YIELD YTM WOW% CBB INTL SUKUK USD 103.94 104.31 6/17/2014 1.53 1.648 -21 RAK CAPITAL USD 105.75 106.75 7/22/2014 1.81 1.67 -8 ADIB SUKUK USD 104.10 104.49 11/4/2015 1.96 1.913 -5 ISLAMIC DEV BANK USD 102.95 103.02 5/25/2016 1.25 1.314 -5 ADCB CAYMAN USD 105.62 106.12 11/22/2016 2.26 2.368 -5 NAME CURRENCY BID ASK MATURITY DATE YIELD TO MATURITY LAST WEEK YIELD YTM WOW% DUBAI DOF AED 102.25 104.25 11/3/2014 2.47 1.354 82 IDB TRUST SERVIC USD 102.17 103.19 9/16/2014 0.78 0.819 33 INDONESIA SY USD 104.00 104.50 4/23/2014 2.76 2.019 27 ISLAMIC DEV BANK USD 101.62 101.63 10/27/2015 0.79 0.848 20 INDONESIA SY USD 94.50 94.88 11/21/2018 5.52 4.376 19 *The top gainers and losers price ranking is driven by the yield to maturity movement on week to week basis Source: Thomson Reuters EIKON – Sukuk Speed Guide - International Sukuk <0#INTLSUKUK> This service is only available to EIKON users, click here to register The airtime sukuk was approved in November by the sharia board of Meezan, the country's first and largest Islamic bank. The sharia board is led by well-known scholar Muhammad Taqi Usmani. "In terms of innovative sukuk structures, I believe that the local industry is way ahead compared to other global markets, partly due to the strict stance on tawarruq and commodity murabaha of the local sharia scholars," Ali said. Tawarruq or commodity murabaha is a common cost-plus-profit arrangement in Islamic finance, but the practice is criticised by some scholars as not sufficiently based on real economic activity, a key sharia principle. AIRTIME In recent years, telecommunications operators across the Gulf and southeast Asia have tested different structures for their sukuk, helping them offset a lack of tangible or unencumbered assets for use in their financing plans. Malaysian mobile phone operator Axiata Group issued a two-year, 1 billion yuan ($163 million) sukuk in September last year using airtime vouchers through a wakala structure, a common agency agreement in Islamic finance. Last August, its subsidiary Celcom Axiata raised 5 billion ringgit ($1.52 billion) through a murabaha, an Islamic contract that stipulates an agreed mark-up between parties. The public tranche of that deal raised 3 billion ringgit from an order book of more than 10 billion ringgit, while the remaining 2 billion ringgit was placed with strategic investors. In 2007, Saudi Arabia's Etihad Etisalat 7020.SE (Mobily) used airtime in a $2.85 billion sharia-compliant project financing deal, which it refinanced in 2010 with same format. The United Arab Emirates' Etisalat ETEL.AD set up an airtime- based sukuk programme in November 2010 but did not tap the market.
  7. 7. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 7 PIPELINE ISSUE EXCLUSIVE-SocGen plans $300 mln sukuk programme in Malaysia-sources By Al-Zaquan Amer Hamzah / REUTERS KUALA LUMPUR | Sat, Aug 24 Societe Generale will launch a 1 billion ringgit ($300 million) Islamic bond programme in Malaysia, two sources familiar with the deal told Reuters, becoming the second major European bank to issue sukuk and the first to do so in Asia. SocGen, France's second-largest listed bank, is planning to issue the first tranche of the sukuk by the year-end, said one of the sources, who declined to be identified as he was not authorised to speak on the matter. Western banks looking to raise capital are increasingly drawn to the Islamic bond market as the cost of credit is lower than in conventional markets. The Middle East unit of HSBC Holdings HSBA.L tapped the market in 2011 with a five-year $500 million issuance. The growing popularity of Islamic debt as a choice of investment among Muslim banks and funds is also buoying the outlook for sukuk, as Islamic bonds are known. Issuers of sukuk do not pay interest, a practice forbidden in Islam. Instead, buyers of sukuk become co-owners of the debt and receive annual profits from the issuer. Global sukuk issuance grew 54 percent to $131.2 billion last year, with Malaysia accounting for 74 percent of primary market issuances. Saudi Arabia followed with a 8 percent market share, and the United Arab Emirates with 4.7 percent and Indonesia with 4.6 percent, according to KFH Research, an Islamic investment research firm. Malaysia has emerged as the world's No.1 market for primary sukuk issuances, with its strong regulatory framework, low taxes and geographical proximity to expanding Asian wealth. The Malaysian central bank last month implemented new laws to stress compliance with Islamic laws, introducing higher penalties and making sharia advisors legally liable for the first time. Hong Leong Islamic Bank is advising the SocGen deal, according to the source. SocGen will soon seek approval for its issuance plans from Malaysia's Securities Commission, having already received the green light to become a bond issuer from the central bank, the source said. The central bank did not immediately respond to a request for comment, while a Hong Kong-based spokesperson for SocGen declined to comment. The funds raised will go towards buying assets in Dubai, where SocGen's Middle East private banking operations are headquartered, said the source. "Everything is in place," the source said. EYE ON MALAYSIA The issuance will help SocGen diversify its funding sources while benefiting from attractive premiums. In the past year, three-year AAA-rated sukuk have offered yields of 3.65 to 3.72 percent, while conventional bonds with a comparable tenor and rating have yielded 3.69 to 3.76 percent. The lower yield range for sukuk translates into higher savings for issuers. SocGen's sukuk in Malaysia will carry tenors of up to 15 years, according to the second source. "For European countries that have yet to develop a regulatory framework for Islamic finance, Malaysia is an attractive destination," said Baljeet Kaur Grewal, managing director and vice chairman of KFH Research. The large number of industry players in Malaysia, including foreign institutions mandated to invest in Islamic instruments, creates a ready market with significant demand for sukuk, said Kaur. "There are a number of corporations planning to raise funds in the Malaysian Islamic capital market, from Australia to the Middle East, and this trend looks set to continue." Other foreign companies such as the National Bank of Abu Dhabi NBAD.AD and Singapore-based palm oil producer Golden Agri- Resources Ltd GAGR.SI have in the past year tapped Malaysia's sukuk market. In the first seven months of this year, issuers in Malaysia raised 19.8 billion ringgit through 47 sukuk, according to Thomson Reuters data. That was a decline of nearly a third from a year earlier due to uncertainties surrounding a May election in Malaysia and a dip in external demand. However, demand from Malaysia's public institutional funds such as the Employees Provident Fund and Lembaga Tabung Haji has remained resilient.
  8. 8. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 8 INTERNATIONAL SUKUK LEAD ARRANGERS LEAGUE TABLE 2013 BOOK RUNNER AMOUNT ISSUED ($MILLION) MARKET SHARE NUMBER OF ISSUES HSBC 1,987.5 16.6 7 Deutsche Bank 1,574.6 13.2 3 Standard Chartered 1,182.0 9.9 8 Emirates NBD PJSC 886.0 7.4 7 Citi 782.2 6.5 4 National Bank of Abu Dhabi 704.2 5.9 5 Dubai Islamic Bank Ltd 682.2 5.7 4 Riyadh Bank Ltd 500.0 4.2 1 Bank Al Bilad 500.0 4.2 1 Alinma Bank 500.0 4.2 1 RHB 434.4 3.6 3 RBS 291.7 2.4 2 Malayan Banking Bhd 200.0 1.7 1 Abu Dhabi Commercial Bank Ltd 165.6 1.4 1 Abu Dhabi Islamic Bank (ADIB) 165.6 1.4 1 Natl Comml Bank Saudi Arabia 125.0 1.0 1 Kuwait Finance House 125.0 1.0 1 Natixis 125.0 1.0 1 Al Hilal Islamic Bank 125.0 1.0 1 CIMB Group Sdn Bhd 125.0 1.0 1 Credit Agricole CIB 125.0 1.0 1 Barwa Bank QSC 125.0 1.0 1 Masraf Al Rayan 74.6 .6 1 QInvest LLC 74.6 .6 1 Alkhair Capital Saudi Arabia 74.6 .6 1 Goldman Sachs 74.6 .6 1 11,974.9 17 Source: Thomson Reute Source: Thomson Reuters SUKUK PIPELINE 2013 Issuer Name Sukuk Structure Country Status Subsc. Date Issue Size ($M) Tenor Arranger/Advisor Inverfin Sukuk Berhad Unknown Malaysia Announced - 56.471 - - Al Madina Financial & Investment Services Company Unknown Oman Announced - 129.88 - - Riyad Bank Unknown Saudi Arabia Announced - - - - Bahrain Telecommunications Company Unknown Bahrain Rumoured - - - BNP Paribas Citigroup Ministry of Finance - Egypt Musharaka Egypt Announced 2014 2,000 3 Years to 5 Years National Bank of Egypt WOM Finance Ijarah Indonesia Announced 2013 28.841 - - Inverfin Sukuk Berhad Unknown Malaysia Announced - 56.471 - - Source: Zawya. For complete list of pipeline click here
  9. 9. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 9 BANKING NEWS Oman Development Bank considers Islamic window By Fatma Alarimi and Bernardo Vizcaino / REUTERS MUSCAT/ Thu, Aug 22 Oman Development Bank (ODB) is considering the launch of an Islamic window to offer sharia-compliant products to small and medium-sized firms, an executive said. In December, Oman became the last country in the six-member Gulf Cooperation Council to adopt Islamic finance, issuing regulations for the sector. Developing Islamic finance and smaller firms are two policies which the government hopes will cut unemployment. Government-owned ODB, founded in 1977, considered a full- fledged conversion to become an Islamic bank but is likely instead to opt for an Islamic window, said Hamed bin Salim Al Harthy, assistant general manager for branches at ODB. "The bank will not move toward becoming a full Islamic bank but we have to keep up with the trend in the market, and the trend is for Islamic products," he told Reuters. Al Harthy said he did not expect the Islamic window to start operating before the end of this year since the bank was currently restructuring its operations. ODB, which had a net loan portfolio of 100 million rials ($260 million) as of August 2012, already offers interest-free loans of up to 5,000 rials but they are technically not sharia-compliant. . In March, the bank held a training course for its senior staff on Islamic banking products, which follow religious principles such as a ban on interest payments. Although ODB is small, it could add competition to Oman's fledgling Islamic finance sector. Central bank chief Hamood Sangour al- Zadjali said last week that the central bank had no intention of granting more permits for new Islamic banks or windows, but ODB is believed to already have permission in principle for a window. Oman has two full-fledged Islamic banks, Bank Nizwa and Al Izz Islamic Bank, as well as several Islamic windows from conventional lenders. Under the rules for Islamic windows, ODB would only be able to offer Islamic products through stand-alone branches, which would require converting some of its existing 15 branches or opening new ones.
  10. 10. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 10 EQUITIES REVIEW MARKETS OVERVIEW STOCKS NEWS MIDEAST-Individual speculators to dominate Gulf By Nadia Saleem / REUTERS DUBAI | Sun, Aug 25 MARKET SNAPSHOT MEA Value WoW MTD YTD TASI 8190.89 0.42% 3.48% 20.43% DFMGI 2734.52 4.08% 5.64% 68.53% ADI 3957.95 2.17% 2.87% 50.44% KWSE 8078.33 -0.69% 0.10% 36.13% XU100 67932.32 -8.54% -7.42% -13.14% EGX30 5467.30 2.49% 2.68% 0.09% MSI 6915.15 1.00% 4.09% 20.04% QSI 10077.32 1.69% 3.84% 20.56% Global Value WoW MTD YTD FTSE 100 6492.10 -0.12% -1.95% 10.08% DAX 8416.99 0.30% 1.70% 10.57% STOXX 50 1080.24 -0.99% 2.09% 7.21% DJIA 15010.51 -0.47% -3.16% 14.55% S&P 500 1663.50 0.46% -1.32% 16.64% TOPIX 1082.07 -0.08% 0.88% 32.95% HANG SENG 67932.32 -8.54% -7.42% -13.14% NIKKEI 13660.55 0.08% -0.06% 31.41% Source: Thomson Reuters EIKON - Indices Guide <Indices> Individual speculators are likely to continue dominating Gulf markets because of thin local news flow. Retail traders have led stocks in the United Arab Emirates and Qatar in recent days, while Saudi Arabia and Kuwait are usually directed by local individual investors even in normal times. Dubai's Union Properties, which jumped 29.9 percent to 0.54 dirham last week, shows no sign of losing steam. Its break above major chart resistance at 0.50-52 dirham, where it peaked in May this year and March 2012, triggered a double bottom formed by the 2011 and 2012 lows. That pattern points up to the 0.75 dirham area in coming weeks or months. The stock is up 37.5 percent year-to-date, underperforming the Dubai benchmark .DFMGI, which has risen 66.4 percent. Fellow property firm Deyaar also broke major technical resistance last week; its rise to 0.50 dirham eclipsed the 2012 high of 0.46 dirham. In Qatar, Qatar International Islamic Bank's jump to 59.60 riyals on Thursday broke major technical resistance around 58.00 riyals, which had repeatedly capped the stock since early 2011. It faces further resistance at 60.00 riyals, the January 2009 peak, but any clean break (two daily closes) would trigger a double bottom formed by the 2008 and 2009 lows and pointing up above 80 riyals in the long term. In Egypt, the army-backed government shortened a night-time curfew by two hours on Saturday, 10 days after imposing it during a fierce crackdown on Muslim Brotherhood protesters in Cairo. This, as well as the protesters' failure to stage major demonstrations on Friday, may support sentiment in the stock market .EGX30, though many local and foreign investors think an extended rally remains unlikely without clearer signs of an easing of political tensions. Global market cues are slightly positive; stock indexes around the world edged higher on Friday while the dollar fell after a U.S. government report on new single-family home sales raised doubts about the timing and extent of cuts to the Federal Reserve's stimulus program. A rise in gasoline futures helped oil prices pull higher on Friday following news of a unit shutdown at a Canadian East Coast refinery. Brent crude rose to $111.04 per barrel. 90 110 130 150 170 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Thomson Reuters/ IR Islamic Indices MENA Global AsiaPac ex Japan
  11. 11. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 11 FOREIGN EXCHANGE REVIEW FOREX-Dollar slides after disappointing U.S. housing data By Wanfeng Zhou / REUTERS NEW YORK,| Fri, Aug 23 The dollar fell against a basket of currencies on Friday, retreating from a three-week peak against the yen, as a steep drop in U.S. new home sales dented expectations that the Federal Reserve will reduce its asset-buying program next month. The euro climbed above $1.34 after the data, edging back toward a six-month high set on Tuesday. Signs of an improving euro zone economy have buoyed the currency in recent weeks. Sales of new U.S. homes slid 13.4 percent in July to their lowest in nine months, hurt by the rise in U.S. mortgage rates, suggesting an economy that may not be as robust as many people think. "This report makes it look more likely that tapering will come later rather than sooner, perhaps under the leadership of a new Fed chair," said Douglas Borthwick, managing director of Chapdelaine Foreign Exchange in New York. The dollar slipped 0.2 percent against a basket of six major currencies to 81.360. Uncertainty about when the Fed will start reducing its $85-billion per month bond buying program has pressured the dollar in recent weeks. Minutes of the Fed's July meeting showed differences of opinion among members of the Federal Open Market Committee as to when the central bank should act. Currency speculators pared their bets in favor of the U.S. dollar for a fifth consecutive week in the week ended Aug. 20, data from the Commodity Futures Trading Commission showed on Friday. The value of the dollar's net long position fell to $13.54 billion, the smallest in two months, from $17.62 billion the previous week. Speculators were bullish on the euro for a third straight week. The euro rose 0.2 percent to $1.3383, helped by comments from European Central Bank policymaker Ewald Nowotny, who said he did not see much reason for the ECB to cut interest rates. He spoke after surveys showed euro zone economic activity quickening. A second reading of German gross domestic product confirmed that Europe's biggest economy grew by 0.7 percent in the second quarter, helped by domestic demand, fueling optimism Europe's largest economy will outperform in 2013. The recent pickup has pushed euro zone money market rates higher, and if sustained, is likely to challenge the effectiveness of the ECB's pledge to keep rates low until a full-fledged recovery is in place. On the week, the euro was up 0.4 percent and 0.6 percent firmer so far in August. The dollar slipped 0.1 percent to 98.68 yen after hitting a three- week high of 99.15 yen on the Reuters trading platform. Despite the pullback, the dollar is still heavily favored by investors over the yen this year. The gap between two-year U.S. Treasury yields and their counterpart in Japanese government bonds moved to the widest since March 2012 and should encourage more investors in Japan to buy U.S. Treasuries, analysts said. Sebastien Galy, currency strategist at Societe Generale in New York, said "there has been a tick-by-tick correlation between dollar/yen and U.S. bond yields, which has certainly supported that pair." On the week, the dollar rose 1.1 percent against the yen. So far this year, the dollar has gained 13.7 percent against the yen. The euro rose 0.1 percent to 131.97 yen, after touching a one- month high of 132.42. The dollar also fell against other currencies, down 0.2 percent at 0.9211 Swiss franc. The Australian dollar gained 0.3 percent to #0.9033. U.S. one-hundred dollar bills are seen in this photo illustration at a bank in Seoul August 2, 2013. The dollar fell against a basket of currencies on Friday, retreating from a three-week peak against the yen, as a steep drop in U.S. new home sales dented expectations that the Federal Reserve will reduce its asset-buying program next month. REUTERS/Kim Hong-Ji
  12. 12. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING 12 INTERBANK MARKETS REVIEW Thomson Reuters Islamic Interbank Benchmark Rate (IIBR) The IIBR overnight rate dropped on Sunday to 0.183 from 0.200 and the one week rate to 0.240 from 0.250. The one month rate also decreased to 0.380 from 0.383, the three months rate nudged up to 0.557 from 0.550, the six months rate to 0.706 from 0.700 and the one year rate dipped to 1.01 from 1.0125 since last week. Dutch lender Rabobank tots up likely costs of Libor scandal By REUTERS FRANKFURT | Thu, Aug 15 Rabobank RABO.UL, one of several banks named by the authorities in the international Libor interest rate rigging scandal, has made an unspecified provision in its first-half results for settling with regulators. The Dutch cooperatively-owned bank expects certain regulatory agencies and authorities to conclude their investigations this year, it said in a statement on Thursday. "Taking into account the uncertainties regarding the timing of (the) conclusion of these investigations, Rabobank has made an estimate of these settlement amounts," it said. "The amount of the provision is not disclosed," it added. Earlier the bank reported a 14 percent drop in its first-half net profit to 1.1 billion euros (£943.9 million), reflecting higher bad debts. "The Dutch economy remained in recession and the prospects for recovery continue to be poor," Piet Moerland, chief executive, said in a statement. The bank, which reported a full-year net profit of 2.1 billion euros in 2012, has already announced sweeping job cuts, branch closures and reductions in remuneration packages to save about 1 billion euros in costs. About 8,000 domestic retail banking jobs will go by 2016 - reducing the headcount in those operations by nearly a third to 20,000 from 28,000, while Rabobank said it will close about 300 out of the 800 or so existing branches of its member banks. *The Islamic Interbank Benchmark Rate (IIBR) is published at 11 am Makkah time (GMT +3) Sunday . # The London Interbank Offered Rate (LIBOR) is published at 11 am GMT Friday. Source: Thomson Reuters EIKON <ISL/MONEY> Thomson Reuters Islamic Interbank Benchmark Rate- IIBR <IIBRFIX> 0.19 0.24 0.35 0.43 0.54 0.70 0.86 0.99 0.117 0.148 0.184 0.226 0.262 0.396 0.000 0.676 0 0.5 1 1.5 2 ON SW 1M 2M 3M 6M 9M 1Y Yield Curve: IIBR* and LIBOR IIBR LIBOR 0.070 0.100 0.170 0.220 0.420 0.3400.470 0.470 0.100 0.170 0.220 0.420 0.340 0.470 0.510 0 0.5 1 1.5 2 2.5 3 ON SW 1M 2M 3M 6M 9M 1Y Yield Curve: Murabaha and Wakala Rates Wakala Murabaha
  13. 13. ISLAMIC FINANCE GATEWAY – WEEKLY BRIEFING A service of Thomson Reuters and Zawya Islamic Finance Gateway The contents of this briefing are independently compiled by the Thomson Reuters and Zawya Islamic Finance Gateway Service, a business of the Global Growth and Operations Division. While material is drawn from Reuters News and other sources, Reuters has not participated in the selection of these articles. The production of the briefing is supported by the Bahrain Economic Development Board (EDB) and Tamkeen (Labour Fund) as part of their initiatives to promote Islamic Finance in Bahrain. Privacy Statement: To find out more about how we may collect, use and share your personal information please read our Privacy statement. You may instruct us to remove you from the Thomson Reuters Zawya Islamic Finance Gateway by clicking here. Thomson Reuters, 3 Times Square, New York, NY 10036, USA 13 Global Islamic Indices Last Net Chng WoW Chng MTD Chng YTD Chng Global Indices Last Net Chng WoW Chng MTD Chng YTD Chng Thomson Reuters/IR Islamic GCC Index 143 -0.44 1.40% 2.44% 16.59% Thomson Reuters GCC 200 -0.08 1.66% 2.78% 25.70% Thomson Reuters/IR Islamic MENA Index 128 -0.33 1.33% 2.26% 15.80% Thomson Reuters MENA 135 -0.08 1.60% 2.60% 23.98% Thomson Reuters/IR Islamic Global Index 176 1.17 0.18% 0.23% 8.54% Thomson Reuters Global 152 1.08 -0.39% -0.67% 8.46% DJ Islamic Market World 3292 0.00 0.22% 0.45% 9.80% DJ INDU AVERAGE 15011 46.77 -0.47% -3.16% 14.55% DJ Islamic Sustainability 2826 0.00 0.63% 1.37% 9.07% DJ Sustainability World 80 Price Index 1493 0.00 -0.94% 0.05% 5.32% MSCI World Daily PR 1080 6.45 0.12% -0.29% 15.14% MSCI World Price Return 1508 10.69 -0.02% 0.04% 12.70% S&P500 Shariah 1440 6.37 0.78% -0.66% 14.85% S&P 500 1664 6.54 0.46% -1.32% 16.64% FTSE4GDB Global 6223 0.00 -0.06% 0.78% 12.10% FTSE100 6492 45.23 -0.12% -1.95% 10.08% Emerging Markets Islamic Domestic 932 3.63 -1.11% 1.10% -8.27% DJIM World Emerging Markets 1944 3.35 -1.96% -1.11% -9.57% DJ Islamic GCC 1990 0.13 0.27% 3.32% 20.29% Dow Jones GCC 1806 0.18 0.76% 3.08% 20.13% DJ Islamic Global Finance & Takaful 1243 -0.04 0.47% 2.81% 18.38% DJ Global Financials 199 -0.02 -1.00% -0.57% 9.98% Thomson Reuters /IR Islamic Indices Last Net Chng WoW Chng MTD Chng YTD Chng Thomson Reuters National Indices Last Net Chng WoW Chng MTD Chng YTD Chng Malaysia 194.99 -0.45 -3.18% -1.95% 4.18% Malaysia 426.82 0.09 -3.96% -2.68% 6.34% UAE 155.37 3.05 4.27% 5.01% 59.32% UAE 266.99 1.74 3.01% 4.05% 56.10% Indonesia 245.48 -0.01 -9.77% -9.08% 4.56% Indonesia 416.36 0.14 -9.74% -10.82% -4.88% Kuwait 100.67 -0.42 0.49% 0.35% 6.85% Kuwait 123.35 -1.16 -0.06% -0.51% 2.41% Qatar 206.52 -1.01 2.25% 3.36% 9.32% Qatar 229.20 -0.50 1.59% 3.55% 21.40% Bahrain 56.59 -0.71 2.18% -0.98% 5.38% Bahrain 111.59 -0.37 0.54% 0.16% 17.12% Turkey 272.16 -0.75 -6.30% -4.62% 6.16% Turkey 1588.29 -10.81 -7.72% -6.15% -5.55% Oman 172.26 0.13 1.77% 4.29% 22.01% Oman 123.05 0.28 1.21% 4.39% 18.40% Egypt 120.25 0.53 1.67% 2.89% -3.04% Egypt 150.00 0.79 2.03% 1.61% -2.17% Top Performing Sharia-based Companies Last Country Sector 5D Chng YTD Volume FIRST TAKAFUL FTIK.KW 120 Kuwait Financials 26.32% 84.62% - STAN CHARTD MD SCMD.KA 15 Pakistan Financials 1.35% 30.43% 17,500 B.R.R. GUARD MOD BRR.KA 4.62 Pakistan Financials -9.59% 50.98% 50,000 CREDIT RATING TAHS.KW 84 Kuwait Industrials -2.27% 115.00% 1,500 Bottom Performing Sharia-based Companies Last Country Sector 5D Chng YTD Volume ISLAMIC INSUR CO TIIC.AM 1.15 Jordan Financials -5.00% -12.31% - 1ST PAK MOD PAKM.KA 1.4 Pakistan Financials -13.58% -25.13% 1,000 STAN CHARTD MD SCMD.KA 15 Pakistan Financials 1.35% 30.43% 17,500 TAKAFUL-EM/d TKFE.DU 0.64 United Arab Emirates Financials -1.64% 5.61% - Top Performing Sharia-compliant Companies Last Country Sector 5D Chng YTD Volume INS BIOSCIENCE INSB.KL 0.065 Malaysia Healthcare 116.67% 85.71% 35,719,900 SURE ENERGY SHR.TO 0.295 Canada Energy 78.79% -49.14% 268,557 TPC MECHATRONICS 048770.KQ 6120 South Korea Industrials 76.37% 230.81% 6,458,850 WESDOME GOLD WDO.TO 0.69 Canada Basic Materials 74.68% -18.82% 75,755 Bottom Performing Sharia-compliant Companies Last Country Sector 5D Chng YTD Volume VELTI PLC VELT.O 0.35 Ireland Technology -63.16% -92.22% 6,078,135 SPYKER SPYKR.AS 0.3 Netherlands Cyclical Consumer Goods & Services -62.50% -85.00% 128,195 DBA TELECOM/d 3335.HK 2.03 Hong Kong Industrials -49.75% -59.88% - TOBA PULP LESTAR INRU.JK 600 Indonesia Basic Materials -48.72% -57.14% 17,000 ISLAMIC MARKET INDICATORS Commodities Last Net Chng WoW Chng MTD Chng YTD Chng CRUDE APR3 106.32 1.32 -1.06% 1.23% 15.79% NGAS APR3 3.48 -1.69 3.33% 0.99% 3.85% GOLD APR3 1396.3 1.82 1.85% 6.38% -16.80% CRUDE APR3 24.05 3.05 3.10% 22.50% -20.70% SILVER MAY3 106.32 1.32 -1.06% 1.23% 15.79% Currencies Last Bid Net Chng WoW Chng MTD Chng YTD Chng Euro 1.338 0.00 0.38% 0.60% 1.41% Japanese Yen 98.69 0.03 1.20% 0.85% 13.78% GB Pound 1.5569 0.00 -0.37% 2.39% -4.20% Swiss Franc 0.9218 -0.00 -0.49% -0.46% 0.69% Australian Dollar 0.9025 0.00 -1.69% 0.50% -13.16% Indian Rupees 63.19 -1.36 2.50% 3.86% 14.91% Malaysian Ringgit 3.3 -0.01 0.76% 1.69% 7.95% Bonds (Top Benchmarks) Bid Yield Net Chng WoW Chng MTD Chng YTD Chng US5Y 1.6233 0.00 3.99% 17.12% 123.90% US10Y 2.8183 0.00 -0.24% 8.90% 60.40% EU5Y 0.903 0.01 11.48% 36.82% 216.84% EU10Y 1.939 0.01 3.41% 15.69% 48.58% ES5Y 3.459 0.05 4.12% 4.41% -14.80% IT5Y 3.182 -0.00 4.43% -2.48% -5.16% GR10Y 10.148 0.03 4.44% 1.19% -14.88% PT5Y 6.206 -0.09 3.97% 5.15% 19.97%