Islamic Finance Malaysia

Friday, 23 May 2014

Malaysia: FGV to issue US$1b sukuk

EXPANSION DRIVE: Conglomerate in midst of choosing banks for the exercise, say sources

PLANTATION giant Felda Global Ventures Holdings Bhd (FGV) is considering selling more than US$1 billion (RM3.21 billion) of dollar-denominated exchangeable Islamic bonds (sukuk), said three people with knowledge of the deal.
    According to them, the bonds will be issued later in the year to finance its expansion drive.
    "FGV is in the midst of choosing banks for the potential offer. It wants to raise cash to buy up more companies to support its existing businesses, albeit cautiously," the sources said.
   Part of the proceeds will be used for potential acquisitions of additional landbank in Southeast Asia and Africa  by 2015 for planting oil palm and rubber.
    FGV raised more than RM11 billion by selling shares on the local stock exchange in 2012. Its initial public offering (IPO) was the second-largest in the world, after Facebook,  that year.
     A portion of the IPO exercise's proceeds was used for capital expenditure to increase efficiency as well as extension of capabilities, plantation acquisitions, expansion of downstream activities and other working capital requirements.
    For fiscal year 2013, FGV's net profit surged 21.72 per cent to RM980.99 million despite the tough economic conditions. Revenue for the full year was RM12.6 billion.
     Its cash and near cash as at end-December stood at RM5.02 billion.
    FGV plans to acquire new businesses and increase plantation acreage and crude palm oil (CPO) production to achieve its revenue target of RM100 billion.
    The company manages 853,000ha of plantations in Malaysia and Indonesia.
    Last year, the company produced 3.21 million tonnes of CPO and it plans to increase production to more than four million tonnes.
    President and chief executive officer Mohd Emir Mavani Abdullah told Business Times recently that FGV aims to manage more than one million hectares of plantations.
    He said to be a RM100 billion turnover company, FGV would need to grow by eight times.

(Business Times / 23 May 2014)
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Thursday, 22 May 2014

Malaysia: Religious council introduces online zakat payment system

IPOH: The state Islamic Religious and Malay Customs Council has introduced a system which enables zakat (tithe) payments to be done online.

The system, e-PZB, was launched by state secretary Datuk Seri Abdul Puhat Mat Nayan at Dewan Bankuet of the State Secretariat building here recently.
The council's chief executive officer Dr Amiruddin Muhamed said with the online system, there is no reason for the people to shy away from paying zakat.
"With the system, you just need to register with us and we will take care of the rest," he said.
Amiruddin said with the online system, one could even pay RM10 for zakat.
"The system eliminates red tape."
Amiruddin said the council needed to increase its zakat collection as more poor people in the state are waiting for assistance.
Citing an example, Amiruddin said the council built 300 homes for the poor last year and this year the number would be increased to 400 units.
"The cost to build the homes has also increased from RM35,000 to RM38,000 for two-bedroom units while the cost to build three-bedroom homes had increased to RM44,000 from RM40,000," said Amiruddin.
Besides homes for the poor, Amiruddin said the council also had 51 other assistance.
Those facing problems to sign up with the system can call the council at 05-208 4000.
Puhat said the number of people paying zakat in the state was relatively small. He hoped the number of people paying zakat would increase through this online system.


(New Straits Times / 22 May 2014)

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Wednesday, 29 January 2014

Malaysia Taxes Spur Indonesian Oil-Palm Sukuk

Bumitama Agri is joining Indonesian oil-palm planters selling sukuk in Malaysia to take advantage of the nation’s tax breaks and to tap its record Shariah-compliant banking assets.
The company set up a 2 billion ringgit ($599 million), 15- year Islamic bond program for investment and refinancing, according to a Jan. 21 stock exchange filing.
Singapore-listed Golden Agri-Resources, which has operations in Indonesia, was the last producer of the commodity to sell ringgit-denominated sukuk in July, paying a coupon rate of 4.75 percent for 2018 securities.
They yielded 4.91 percent on Jan. 24. Malaysia, whose Shariah-compliant banking assets more than doubled in the past five years to 543 billion ringgit, provides tax incentives for agricultural bonds as part of an effort to reinforce its position as a global Islamic hub.
Corporate issuance of sukuk in Indonesia rose almost 18 percent in 2013 to 2.2 trillion rupiah ($179 million), trailing the $14 billion in Malaysia, data compiled by Indonesia’s Financial Services Authority and Bloomberg show.
“We’re getting a fair bit of enquiries from Southeast Asian plantation firms,” Mohd Effendi Abdullah, head of Islamic markets at Kuala Lumpur-based AmInvestment Bank, the nation’s third-biggest Shariah-compliant debt arranger in 2013, said in a phone interview yesterday. “Islamic bonds are ideal for such companies because they can use the assets and the agricultural income to back the offering.”
Tax deduction
To encourage the issuance of agricultural-based sukuk, Prime Minister Najib Razak said in his September budget speech that taxes on expenses and stamp duties on such debt would be waived for four years through 2015. The securities pay returns on assets to comply with the Koran’s ban on interest.
Indonesia’s First Resources has also tapped the nation’s Islamic investors. The Singapore-based palm-oil firm sold 600 million ringgit of five-year securities in July 2012 at a coupon rate of 4.45 percent and they were paying 4.39 percent yesterday, Bursa Malaysia data show.
Golden Agri, the world’s second-biggest planter of the commodity after Malaysia’s Sime Darby Bhd., issued its first sukuk in November 2012.
The 1.5 billion ringgit of five-year notes paid a coupon of 4.35 percent and were yielding 4.85 percent on Jan. 24. Both securities are rated AA2 by RAM Rating Services, the third-highest investment grade.
Yields on AA-rated corporate debt sold in Malaysia climbed four basis points, or 0.04 percentage point, in 2014 to 4.45 percent as of Jan. 21, the highest level since June 2012, according to a central bank index.
‘Naturally compatible’
“Plantations and most other cash-crop commodities businesses are naturally compatible with Shariah-compliant financing structures,” Alhami Mohd Abdan, Kuala Lumpur-based head of international finance and capital markets at OCBC Al- Amin Bank said in an e-mail interview yesterday. “The sukuk market, and particularly the investor base in Malaysia, is very familiar and comfortable with” such issuance, he said.
Bumitama is tapping the market just as global borrowing costs are climbing amid stimulus tapering by the Federal Reserve.
Emerging-market sovereign bond yields advanced 15 basis points this year to 6.25 percent, the highest level since Sept. 13 and above the 2013 average of 5.47 percent, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Bloomberg-AIBIM Bursa Malaysia Corporate Sukuk Index, which tracks the most-traded local-currency notes issued in the world’s biggest market for the debt, fell 1 percent this year to 104.120 after gaining 2.8 percent in 2013.
Bumitama’s bonds are rated AA3 by RAM Ratings, one level lower than those of Golden Agri and First Resources.
The issuance will be the company’s first and adds to a 5.5 trillion rupiah outstanding loan that comes due in 2018, according to data compiled by Bloomberg.
Market Depth Offerings of ringgit-denominated Islamic debt total 2.1 billion ringgit this year, compared with 181 million ringgit in the year-earlier period, according to data compiled by Bloomberg.
Other Southeast Asian oil-palm growers have also turned to Malaysia for funding via the sukuk market. Noble Group Ltd., which is listed on Singapore’s stock exchange, issued 300 million ringgit at a coupon rate of 4.3 percent in January 2013.
The three-year securities yielded 4.61 percent when last traded on Jan. 22, Bursa Malaysia data shows.
Malaysia’s Kuala Lumpur Kepong Bhd. sold 1 billion ringgit of 10-year notes in 2012 at 4 percent and they were paying 4.7 percent on Jan. 27. Islamic bonds aren’t actively traded because investors tend to hold them until maturity due to their relative scarcity compared with conventional bonds.
“For sukuk, Malaysia is one of the better places as we have the infrastructure in place, while market depth and liquidity aren’t an issue,” Lam Chee Mun, a Kuala Lumpur-based fund manager at TA Investment Management overseeing 680 million ringgit, said in a telephone interview yesterday. “If you think you want international investor participation, especially Islamic funds, you’d have to think of Islamic rather than conventional financing.
(Jakarta Globe / 28 Jan 2014)
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Tuesday, 28 January 2014

Malaysia: Labuan IBFC allocates US$1m to promote Islamic wealth management

KUALA LUMPUR (Jan 28, 2014): The Labuan International Business and Financial Centre (Labuan IBFC), which aims to continue attracting high net worth individual in Malaysia and South East Asia, has allocated US$1 million (RM3.3 million) to promote Islamic wealth management, said its CEO Saiful Bahari Baharom.
"I see good demand in the market. It is gaining momentum, but it really depends on the growth of the economy. Muslim high net worth individuals want to have Syariah solutions," Saiful told reporters after a memorandum of understanding between Labuan IBFC and the Global University of Islamic Finance (INCEIF) here yesterday.
Saiful Bahari hopes that the collaboration with INCEIF will help raise awareness on Islamic wealth management globally particularly through industry-driven research.
He said the partnership will benefit both Labuan IBFC and INCEIF in terms of pooling their resources to conduct more research into understanding Syariah issues in wealth management.
"We hope to feature the findings from this research into an annual journal focusing on wealth management. At the moment, there is no journal point of reference for Islamic wealth management," he said.
Saiful Bahari said the research topics proposed will cover key components of Islamic wealth management, including Syariah-compliant wealth acquisition, risk management, Islamic wealth preservation and wealth distribution.
At the moment, he said there is no industry wide knowledge of Islamic wealth management and there is a need for experts in this area.
He said Labuan IBFC expects the number of foundations to grow by 100 this year compared to over 100 in 2013.
According to him, Labuan IBFC offers a wide range of wealth management tools suitable for high net worth individuals, family offices and other wealth managers needing a range of structures offering efficient wealth transfer, dynastic planning and inheritance management.
Under the 2010 law, he said Labuan is now one of the few common law jurisdictions offering investors a choice of common law trusts and civil law foundations, propelling the jurisdiction to the forefront of international wealth planning.
(The Sun Daily / 28 Jan 2014)
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Thursday, 16 January 2014

Malaysia: Brunei’s Takaful growth pushes ahead its Islamic finance ambitions

KUALA LUMPUR, Jan 15 — Assets held by the Islamic insurance (takaful) sector in Brunei recently have grown significantly while those of conventional types of insurance have been declining, a report from the country's central bank showed.
The monthly report from Brunei's monetary authority, known as AMBD, said that in the year ended Sept. 30, takaful assets rose 21 per cent to 425 million Brunei dollars (RM1.102 million). Conventional insurers saw a drop of 1.3 per cent in assets during the same 12-month period.
The fast-growing takaful sector indicates Brunei is progressing toward its goal of having Islamic financial products account for up to 60 per cent of total banking assets in five years, compared with 40 per cent at present.
At end-September, Brunei's takaful market accounted for 33 per cent of total insurance assets, up from 29 per cent a year earlier, according to the AMBD report.
Brunei, which has Southeast Asia's highest per-capita income after Singapore, aims to compete in Islamic finance with regional powerhouses Malaysia and Indonesia. That is part of a strategy to wean itself off dependence on oil reserves, which are expected to run out in about two decades, and diversify Brunei's economy.
Brunei, Malaysia and Indonesia have the largest potential for retail Islamic banking in Southeast Asia. The combined population of the three Muslim-majority countries is nearly 280 million.
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.
Assets of Indonesian takaful firms grew 43 per cent to 13.1 trillion rupiah (RM3.61 billion) during 2012, from 9.15 trillion rupiah a year earlier, data from that country's regulator showed. Takaful firms accounted for 2.3 per cent of Indonesia's total industry assets.
A proposed law in Indonesia that requires takaful firms to be spun off into standalone entities could, when enacted, spur mergers in that market. 
In July, Malaysia declared new rules for takaful firms to separate life and general business lines, a move observers said could spur buy-outs of smaller operations.

(The Malay Mail Online.Com / 15 Jan 2014)
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Monday, 30 December 2013

Growth of Malaysia's insurance, takaful sectors seen stable

KUALA LUMPUR: The growth of the insurance and takaful sectors for 2014 will remain stable amid domestic demand, said industry experts.
Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil said strong growth prospects and improved risk management would lead to increased demand for insurance and takaful amongst the public at large.
He said the industry is anticipated to remain encouraging for both conventional and takaful operators through the introduction of new or enhanced and innovative products by insurance takaful companies.
“There is plenty of room for organic growth, given the fact that Malaysia still has low insurance penetration in both the conventional and takaful sectors.       
“In addition, we project a muted earnings growth outlook in certain areas of the local insurance and takaful industry arena that is likely to be impacted by investment de-risking and financial market volatility,” he told Bernama.
Regarding market players, he said the local insurance and takaful players are expected to utilise multiple distribution options available and develop alternative channels whilst strengthening their agency force to establish a solid foothold in the industry.
He said this will be supported by the implementation of strategic marketing and operating systems on top of competitive and cutting-edge products and services offered by respective industry players.
Hassan Kamil said despite the positive outlook, the industry will face diverse changes that were expected from the enforcement of the Risk-Based Capital (RBC) framework in 2014.       
“The RBC implementation might change the landscape of the takaful industry and the expected contribution growth is deemed to accelerate modestly, with fairly robust growth amongst takaful operators outpacing the conventional players,” he said.
Apart from that, both industries have been experiencing an influx of mergers and acquisitions (M&As) resulting in more foreign insurers tapping into the Malaysian insurance market, he said.
Amongst M&As this year were Khazanah Nasional Bhd’s partnership with Canadian-based Sun Life Financial Inc to acquire 98% of CIMB Aviva Assurance Bhd for RM1.8bil, and American International Assurance Bhd’s acquisition of ING’s insurance and takaful business in June 2013.
The industry has seen new players from Canada and the US coming into the Malaysian market, taking over the smaller local players.
“We have witnessed the emergence of financial solid players in the local insurance industry arena as a result of the M&A exercises.       
“The insurance and takaful industry in Malaysia remains encouraging for both life and general insurance and takaful despite moderating economic growth following the slowdown in major advanced countries,” Hassan Kamil said.
The persistent talent shortage, of professionals well versed in both principles, would be one of the main areas that need to be looked at critically in order to remain competitive in the industry, he said.
In addition, he said the rapid development of insurance and takaful industry has made it all the more difficult to recruit the right human capital needed for the various job functions. 
(The Star Online / 23 Dec 2013)
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Malaysia: Jeddah-based IDB plans to develop Islamic centre of excellence at Tun Razak exchange

KUALA LUMPUR: The Islamic Development Bank (IDB) is considering developing an Islamic Centre of Excellence at the Tun Razak Exchange in the Greater Kuala Lumpur here in three to five years, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today.

He said the centre of excellence would provide services in Islamic finance and banking-related transactions.
The project would be developed in collaboration with the Malaysian government, he said.
"The Malaysian government has always viewed IDB not only as an international institution but also as a partner in charting our nation's growth," he said in his speech at the IDB High Level Regional Forum today.


(News Straits Times / 17 Dec 2013)

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Wednesday, 11 December 2013

Malaysia: UDA to work with Bank Muamalat in developing RM1b wakaf land

PETALING JAYA (Nov 12, 2013): UDA Holdings Bhd will work with Bank Muamalat (M) Bhd to develop 40.47ha of wakaf land with a gross development value of RM1 billion.
The land, ready for development, is spread throughout the country and owned by the respective state Islamic Religious Councils.
Bank Muamalat will provide the end financing for UDA to develop the land.
UDA Holdings group managing director Ahmad Abu Bakar said implementation of development projects on the wakaf land will be based on the concept of Ijarah or leasing.
"Through this concept of Ijarah, ownership of the land to be developed remains with the state Islamic Religious Councils, and only its usage will be transferred," he told reporters after the signing of a memorandum of understanding for the development of the wakaf land between Bank Muamalat and UDA Holdings, here today.
"UDA's model and springboard for the development of wakaf land on a commercial basis using the Ijarah concept, is based on the success in developing the 3.94ha belonging to the Penang State Islamic Religious Council," Ahmad said.
He said the development of wakaf land is still being fine tuned and UDA had also received letters of offer to develop such land in Selangor.
To realise the development of wakaf land, UDA acting as the developer, will underwrite the development costs, while also being responsible for marketing the projects.
"Development of the wakaf land will help add value as well as generate optimum returns," Ahmad said.
(The Sun Daily / 12 Nov 2013)
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Malaysia: Syariah-compliant securities will attract more Middle East investors: PM

KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak is confident the introduction of shariah-compliant securities will attract more investments from the Middle East.

"With the onslaught of a new wave of investments, more job opportunities will be created and this will indirectly make our economy stronger," he said in his latest Facebook posting.
 
Najib, who is also Finance Minister, said luring foreign investments into the country was Malaysia's top priority towards becoming a high-income status  country.
 
"Based on this aspiration, the Securities Commission has introduced revised Shariah-compliant securities in order for Malaysia to draw more investments from the Middle-East," he said.
 
The Securities Commission announced yesterday an updated list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC), based on the revised screening
methodology announced on June 18, 2012.
 
Under the revised screening methodology, SAC will adopts a two-tier quantitative approach which applies the business activity and financial ratio benchmarks. 
 
The revision took into consideration the rapid development taking place in Malaysia's Islamic finance industry since the Shariah screening methodology was first introduced in 1995. 
 
The revision will potentially spur greater inflow of foreign Islamic funds into Malaysian Shariah-compliant equities, thus expanding the Islamic capital market’s global reach, as outlined in the Capital Market Masterplan 2.
 
The updated list, which took effect yesterday, will feature a total of 653 Shariah-compliant securities which constitute 71 per cent of the 914 listed securities on Bursa Malaysia. 
 
The list includes 16 newly classified Shariah-compliant securities and excludes 158 from the previous list issued in May. 
 
To facilitate transition under the revised screening methodology, investors are given six months from Nov 29, being the effective date of the list of Shariah-Compliant Securities, to dispose off securities that are excluded from the list.
 
During the six-months period, dividends received and capital gains realised from the disposal of such securities may be retained by investors, without the need to channel any portion of the dividends and capital gains to Baitulmal and/or charitable bodies.

(News Straits Times / 30 Nov 2013)
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Monday, 9 December 2013

Islamic banking expected to 40% of Malaysia’s financial sector by 2020


Islamic financial business is at the heart of the Tun Razak Exchange (TRX) project, with some experts calculating that Sharia-compliant transactions could account for up to half of the business that will go through the new centre when it is complete.


Dato’ Azmar Talib, the chief executive of 1 Malaysia Development Berhad (1MDB), the real estate business overseeing the project, says Islamic banking comprises about a quarter of Malaysia’s domestic financial market in terms of assets and financing, but this is expected to reach 40 per cent by 2020, when TRX will be well developed.

“We intend to use Malaysia’s strengths, particularly in Islamic finance, to provide the infrastructure that will enable innovation, attract skilled talents and promote ease of doing business in the sector,” he says.

Others are even more positive about Kuala Lumpur’s potential in the global race to build the leading Islamic financial market. Many analysts believe the competition will come down to a three-way pull between KL, Dubai and London.

Malaysia has longevity on its side, and a developed domestic market. About 60 per cent of primary market sukuk (Islamic bond) issuance was in KL in the first half of this year.

Mohammad Daud Bakar, the chairman of the Sharia Advisory Council of Malaysia’s central bank, says the country has advantages in Islamic finance, such as a developed pensions funds industry, takaful (insurance) and long-term project finance.

“We have established private Islamic ratings agencies that vet the sukuk, and we are the only country with a Sharia-compliant equivalent of the American mortgage firms like Freddie Mae,” Mr Bakar says.

But despite the strength of the domestic industry, Malaysia faces some challenges in the international market. “Around 90 per cent of our issuance is in local currency, so we don’t trade in London. Malaysia has never issued any global sukuk. London uses hard currency, and has deep pockets of dollar reserves, which we do not,” he adds.

“But I believe the UAE will be a leader in this market in the future. It has dollar reserves and will be in a position to take business from London.”

Mr Bakar also points to the potential of the Saudi market. “It is booming because of all the infrastructure that needs to be financed there. It’s a booming market and will probably overtake KL in terms of value of issuance, if not volume,” he says.

(The National / 07 Dec 2013)
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