Islamic Finance Malaysia

Saturday, 22 June 2013

Malaysia’s sukuk market to remain bullish this year

KUALA LUMPUR: Malaysia’s sukuk market is expected to remain bullish this year despite the volatility in global markets, especially in the US, says CIMB-Principal Islamic Asset Management chief executive officer, Ramlie Kamsari.

He said Malaysia’s sukuk market will see healthy growth like last year given the strong fundamentals, good infrastructure, regulatory framework as well as the syariah system.

“They (investors) see Malaysia as a good market to tap for both conventional and Muslim investors.

“In fact, the large sukuk issuances recently were due to the huge appetite from conventional investors,” he told reporters after a media briefing on the ‘Global Fixed Income Market and its Potential Effects on Sukuk’ here yesterday.

Ramlie said the local sukuk market was likely to continue to see good interest for the Gulf Cooperation Council issuances, particularly the United Arab Emirates’.

There could also be new issuances from the frontier markets, or the non-traditional ones, including from Europe, he said.

He expected Malaysia to continue to be the world’s largest sukuk market with 69 per cent market share.

Meanwhile, chief investment officer, Michael Zorich, said the global sukuk market moved at a moderate pace as investors were cautious due to the volatility in the fixed income market in the US.

He, however, said the market will catch up towards the year-end and be equalled last year’s RM46.5 billion in value.
“The anticipation of an increase in the US rate will push them (issuers) to wait for the price to be stabilised.
“But, if they don’t issue now, the rates may continue to go up and it can get more expensive to issue the sukuk and bond as well.

So they need to balance their decision,” he said.

Currently, the benchmark 10-year US Treasury rate stood at 2.4 per cent, rising from 1.6 per cent in the early May, and is expected to climb up to 2.5 per cent by year-end.

Ramlie said the volatility in the US fixed income market will not significantly affect the sukuk market as the Islamic bond has its own asset class.

“When investors seek diversification play, they will look at sukuk as another asset class. So, there will be continued demand for investment into sukuk,” he said.

(Borneo Post Online / 22 June 2013)

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Friday, 21 June 2013

Malaysia: New legal set-up to pave way for syariah framework

KUALA LUMPUR: The new legal framework for Islamic banking and takaful, that will come into force this year, will pave the way for the development of an end-to-end Syariah-compliant regulatory framework for the conduct of Islamic financial operations, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.
The new framework would provide clarity on the fundamental requirements of Syariah that must be adhered to for the contractual arrangements between the financial institution and the customer to remain enforceable, she said.“The framework also outlines the operational requirements for the effective application of Syariah principles in the conduct of Islamic financial institutions.“This aims to strengthen the risk management practices beyond the traditional credit, market and liquidity risks to also include inventory risk, ownership risk and Syariah compliance risk,” Zeti said at the opening of the Brunei Darussalam Islamic Investment Summit 2013.
The text of her speech titled, “Tapping and Expanding the Global Investment Opportunity in Asia’s Market”, was made available here today.
She said the legislation also provided for the resolution of Islamic financial institutions to be in line with distinctive elements of the relevant Islamic contracts, thus improving the legal and procedural aspects for the orderly resolution of Islamic financial institutions.
On the Islamic finance development, Zeti said the new wave of internationalisation for Islamic finance required increased collaboration across jurisdictions. — Bernama
to strengthen the international financial infrastructure of Islamic finance.“This is to ensure that the greater internationalisation of Islamic finance takes place in an environment of financial stability,” she added.
At the national level, Zeti said the first priority relates to trend for the domestic Islamic financial system to become more integrated, allowing for risks to be rapidly transmittal, across the financial system.“This requires the development of enhanced regulatory, supervisory and legal frameworks that are also adaptive and effective to the innovative dynamics and unique mix of risks in Islamic finance,” she said.
Zeti said the increased cross-border reach of Islamic finance has also underscored the importance of enhanced cross-border collaboration among the supervisory authorities.“Information-sharing and effective coordination among supervisors will enable a complete understanding of the entire risk spectrum of the risk taking activities undertaken across jurisdictions by the Islamic financial institutions,” she added.
Another key area is the evolution of the legal framework for Islamic finance to provide greater certainty and to build public confidence in the system as a whole, said Zeti.“This necessitates a legal framework that enforces end-to-end Syariah compliance in the Islamic financial services industry - through provisions and mechanisms that unambiguously define the conduct and governance of Islamic financial institutions,” she added.
Zeti also said with greater liberalisation, Islamic finance was increasingly supporting regional and international trade and investment flows, intermediating significant cross-border financial flows.“With its internationalisation, Islamic finance has become an increasingly more important channel for the efficient allocation of Asia’s surplus funds towards productive investments in the region,” she added.
Zeti also said efforts to strengthen the foundations for Islamic finance to ensure its continued resilience, amid the more challenging environment, must remain a priority going forward into the future.“Indeed, our commitment to act guided by this foresight will strengthen the prospect for Islamic finance to realise its potential in the region and beyond,” the governor added. 
(The Star Online / 21 June 2013)

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