Malaysia: Syariah-compliant small cap index launched

KUALA LUMPUR: FTSE Group and Bursa Malaysia have launched the FTSE Bursa Malaysia Small Cap Shariah Index to complement the existing FTSE Bursa Malaysia syariah indices.

In a joint statement, it said the new syariah index was designed to provide investors with a precise benchmark for syariah-compliant investment in Malaysian small cap companies.

The FTSE Bursa Malaysia Small Cap Shariah Index was developed in response to the needs of market practitioners who noted the lack of a benchmark to track the performance of syariah-compliant small cap companies. Constituents are selected from the universe of the FTSE Bursa Malaysia Small Cap Index according to the Malaysian Securities Commission's Shariah Advisory Council screening methodology.

The index is based on FTSE's award winning methodology which includes free float adjustment and liquidity screens and is managed in accordance with a clear and transparent set of index rules governed by an independent index committee.

The new FTSE Bursa Malaysia Small Cap Shariah Index forms part of the FTSE Bursa Malaysia Emas syariah universe and will be calculated on an end-of-day basis. Subscribers to the FTSE Bursa Malaysia Index Series will receive the new index as part of their existing data package at no extra cost.

(The Star Online / 17 Oct 2012)

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Malaysia's Islamic banks ripe for consolidation-Bank Muamalat

KUALA LUMPUR (OCT 18, 2012) : Malaysia's Islamic banks are ready for consolidation as they seek ways to cope with rising operational costs, a top official with Bank Muamalat Malaysia Bhd said, signalling a greater acceptance in US$143.64 billion sector for M&As.

Islamic banks in the past have often been reluctant to merge, in part due to resistance from powerful shareholders who fear a loss of control while strains in global financial markets discourage risk-taking.

Islamic finance has grown in leaps and bounds to account for 23.7% of Malaysia's total banking assets although a major aspect is missing -- the development of megabanks that can issue ground-breaking products in the same way as conventional banks.

"I think consolidation is imminent and we will see a lot of Islamic banks getting together," Bank Muamalat CEO Redza Shah Abdul Wahid told Reuters.

"Costs have risen easily by 20% to 30% mainly due to the shortage of human capital and increased regulatory costs. Margins are falling and the only way to counteract this is to become bigger and more efficient," he added.

Bank Muamalat is now the target of a potential acquisition by financial group Affin Holdings Bhd, which may buy a stake from Khazanah Nasional Bhd and DRB-Hicom Bhd to create the country's fourth largest Islamic bank by assets.

DRB-Hicom holds 70% of Bank Muamalat, while the Khazanah holds the remainder. Affin, which received the greenlight from the Malaysia's central bank to begin negotiations, said the matter will conclude by end-2012.

The combined entity of Affin and Bank Muamalat would elevate both banks to a stronger market position. Affin would grow to the fourth largest Islamic bank by assets from ninth currently, the bank said last month.

"(With consolidation) we would be able to take in all these costs and do bigger deals, I think this is the way forward," Redza said.

DRB-Hicom, controlled by reclusive tycoon Syed Mokhtar Al-Bukhary, purchased a controlling stake in Bank Muamalat in 2008 with a mandate to reduce its holding to 40%.

The company last attempted to divest to Bank Islam Malaysia Bhd and Bahrain-based Al Baraka Islamic Bank.

Bank Muamalat is one of the country's remaining domestic standalone Islamic banks next to Bank Islam Malaysia Bhd, which has retained its leading position in the market.

(The Sun Daily / 19 Oct 2012)

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Islamic finance body, IILM hires new CEO ahead of first sukuk issuance

Kuala Lumpur-headquartered IILM has delayed its first issuance of short-term sukuk, or Islamic bonds, twice since it began operations last year.

The company, which aims to help sharia-compliant banks manage liquidity and create a liquid cross-border market for Islamic instruments, said that Rifaat Ahmed Abdel Karim would take over as chief executive, replacing Mahmoud AbuShamma who was hired in February 2011 on a three-year tenure.

Rifaat was the first secretary general for the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions, IILM said in a statement.

"Rifaat has an impressive career track record in Islamic finance and will certainly add value to the work of IILM," the chairman of IILM's governing board, Dr Mohamed Y. Al-Hashel, said in the statement.

IILM is set to launch its first sukuk of $300 million to $500 million within the next few months, AbuShamma told Reuters in an interview on Oct 2.

The company has faced a challenge to ensure it complies with laws in all of the 12 countries in which its members operate, AbuShamma said in the interview.

Eventually, IILM will issue sukuk totalling more than $2 billion a year, AbuShamma predicted.

IILM members include monetary authorities in Indonesia, Iran, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Saudi Arabia, Sudan, Turkey and the United Arab Emirates as well as the Islamic Development Bank and the Islamic Corporation for the Development of the Private Sector.

(Reuters / 19 Oct 2012)

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Malaysia: Islamic banks urged to be sympathetic to house buyers

KUALA LUMPUR: Islamic banking players have been urged to be sympathetic to house buyers of abandoned projects and not burden them with debt as it may lead to bankruptcy.

Malaysian Muslim Consumers Association (PPIM) financial services monitoring bureau chief, Sheikh Abdul Kareem Said Khadaied said many house buyers face legal action filed by Islamic banking players demanding high payment for uncompleted houses.

Sheikh Abdul Kareem, who was the third panel member, said as an Islamic entity, banks should think of problems faced by Muslim consumers and the officers should discretion to help the house buyers.

PPIM activist Shirazdeen Adam Shah served as forum moderator with Bank Islam Malaysia Bhd sharia division head, Ustaz Mohd Nadzri Chik as second panel member and Bank Muamalat Malaysia Bhd former chief executive officer, Datuk Abdul Manap Abdul Wahab as fourth panel member.

First panel member was Dr Nuarrual Hilal Md Dahlan, director of Institute for Governance and Innovation Study, Universiti Utara Malaysia (UUM)

.

Nurrual said Bank Negara should improve Islamic banking to benefit consumers, especially buyers of houses in abandoned projects.

The government should compel all private developers to complete the houses and sell them by including warranty insurance to avoid problems.

He also urged consumers to buy from government developers like Syarikat Perumahan Nasional Berhad (SPNB) to avoid the risk of bankruptcy.

(Borneo Post Online / 15 Oct 2012)

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Malaysia: Islamic banking expands in Sabah

The positive assessment of recent progress at Sabah’s state banks underlines the confidence in the potential of its financial services sector, particularly in the area of Islamic finance.

In July, Malaysia-based RAM Ratings reaffirmed the Sabah Credit Corporation’s (SCC’s) ‘AA1’ and ‘P1’ issue ratings, stating that the state financial institution had a stable outlook.

In the previous month, RAM Ratings also assigned long- and short-term issue ratings of ‘AA1’ and ‘P1’ to the Sabah Development Bank (SDB), noting the ‘strategic role’ the financial institution played in supporting the state’s goals.

The positive rating for the SCC came just weeks after it issued three tranches of sukuk, with tenures of five, seven and 10 years, amounting to RM200 million (US$65.38 million).

In August, the SDB also issued three tranches of five, seven and 10-year bonds, with a total size of RM500 million (US$163.44 million).

In May, Vincent Pung, the chief executive officer (CEO) of the SCC, told local media that the first issuance of the corporation’s sukuk programme in December 2011 had strengthened the bank’s funding base, supporting the growth of its sharia-compliant business.

“The SCC’s profitability is an indicator of its success, recording a surplus before tax of RM51.7 million (US$16.89 million) for the financial year 2011.

This was an increase of RM9.3 million (US$3.04 million), or 22 per cent, from the audited surplus before tax of RM42.4 million (US$13.86 million) for the previous financial year,” Pung told The Borneo Post.

The confidence in Sabah’s financial services potential is not limited to state institutions, as a number of major foreign banks are now also moving into the market.

Citing its confidence in the ‘rapid economic growth potential of the state’, Standard Chartered Bank opened its first shariah compliant branch in Sabah in February under the name Standard Chartered Saadiq.

It also launched a financial literacy programme called ‘Minda Wang’.

“Islamic banking has been growing twice as fast as conventional banking, owing to the rising customer demand, increasing sophistication of Islamic banking offerings and strong government support.

“The new branch, alongside the activation of Minda Wang, furthers our ongoing strategy to support this growth, while expanding our Islamic banking footprint in East Malaysia and throughout the nation,” said Osman Morad, the managing director and CEO at Standard Chartered Bank Malaysia, at the bank’s opening.

In October 2011, Saudi Arabia’s Al Rajhi Bank – the world’s largest Islamic bank – also opened a branch with an eye on the potential raised by the Sabah Development Corridor initiative, which was estimated to have seen some RM107 billion (US$34.98 billion) in investment since it started four years ago.

Like its state-run and private sector counterparts, Al Rajhi Bank had said it would take aim at providing a wider range of financial services for small and medium-sized enterprises (SMEs), which were expected to become a major engine of economic growth.

In May, SME Corporation Malaysia approved grants and loans totalling RM110.7 million (US$36.19 million) to help SMEs, while in August, talks were held in Sabah as part of an initiative to engage SMEs, business organisations and banks.

Officials told local media that the dialogue would introduce a spectrum of financing options available for SMEs under a nationwide SME masterplan.

The focus on encouraging a symbiotic relationship between small businesses and financial services firms to encourage growth was also apparent in the state’s establishment in February of an SME village.

Under plans for Malaysia to achieve high-income nation status, Sabah is projected to have a per-capita income of around RM32,400 (US$10,591) and achieve a gross national income of RM110 billion (US$35.96 billion) by 2020.

As part of the initiative, SMEs’ contribution to nationwide gross domestic product (GDP) is expected to grow from 33 per cent in 2011 to 40 per cent by 2020.

(Berneo Post Online / 07 Oct 2012)

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Malaysia: International Islamic Liquidity Management (IILM) says first sukuk to debut within months

Kuala Lumpur-headquartered IILM, established last year, aims to issue short term sukuk, or Islamic bonds, to help sharia-compliant banks manage liquidity and create a liquid cross-border market for Islamic instruments.

Issuance of the first sukuk has been delayed. IILM has faced a big challenge to ensure it complies with laws in all of the 12 countries in which its members are, Chief Executive Officer Mahmoud AbuShamma told Reuters in an interview late Tuesday.

"It does not require an extreme amount of effort, but we're setting up a product that is ever-expanding and has many complexities," said AbuShamma, a former HSBC executive who launched Indonesia's first Islamic banking unit operated by a foreign bank.

He said that IILM is 85 percent prepared for the first issuance, and what remains to be worked out are "some highly technical issues."

"It's not our mandate to issue one sukuk and go off on a holiday, we should be manufacturing a continuous supply of it," he added.

Eventually, IILM will issue sukuk totaling more than $2 billion a year, AbuShamma predicted.

IILM members include monetary authorities in Indonesia, Iran, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Saudi Arabia, Sudan, Turkey and the United Arab Emirates as well as the Islamic Development Bank ISDBA.UL and the Islamic Corporation for the Development of the Private Sector.

TESTING THE MARKET

AbuShamma said IILM will initially focus on U.S. dollar-denominated sukuk, as central banks have already met the need for local-currency, short-term instruments.

"Because we are looking to issue at a regular pace, we first need to test the market. It's very critical to assess the engine itself, the capacity of the institution, the system and our processes to see if it is efficient and safe," he said.

The maiden sukuk will use an asset-backed leasing structure in line with an Islamic principle called al-Ijarah. It will aim to get high-quality ratings from international rating agencies, AbuShamma said.

"The pool of assets we're going to have will predominantly be sovereign assets from our member countries," said AbuShamma.

He added the sukuk will be distributed by a network of primary dealers, of which there will be up to two elected in each member's jurisdiction.

The first sukuk will be traded in a secondary market, which could pose fresh challenges as investors prefer to hold Islamic bonds until maturity instead of trading them.

"We have a lot of faith in the dealers, it will be their role to underwrite the issuance and create a secondary market," AbuShamma said.

(Reuters / 03 Oct 2012)

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Islamic finance & management events in Kuala Lumpur Malaysia in 2012

20-21 November 2012: 
KL Conference on Islamic Wealth Management & Financial Planning


11-12 December 2012: 
KL Conference on Islamic Finance

To register or reserve a seat online, please go to:
www.alfalahconsulting.com/p/

registration-form.html

Organizer: Alfalah Consulting
www.alfalahconsulting.com

Islamic banking data for Malaysia (as at 31 July 2012)

Islamic banking data for Malaysia (as at 31 July 2012).
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Malaysia: Ongoing efforts to cement lead in Islamic finance sector

CONTINUOUS efforts were taken to further position Malaysia as the leader in Islamic finance as Islamic finance continued to gain significant importance in the global financial market.

These included a recent review of laws relating to land, hire purchase and contract applicable to Islamic finance by the Law Harmonisation Committee to ensure their compatibility with Shariah and proposed amendments to the legislation to facilitate Islamic finance transactions. On the international front, global engagement and alliances in Islamic finance continued to be fostered in the first seven months of 2012.

The International Centre for Education in Islamic Finance has signed MoUs with the World Bank and the Islamic Financial Services Board in efforts to enhance collaboration on sharing of knowledge, undertaking research, development, training, and education in the Islamic financial services industry.

The Islamic capital market has contributed significantly to the development of the overall capital market and remains as important alternative source for raising capital. As at end-July 2012, 825 Shariah-compliant securities were listed on Bursa Malaysia, representing 89% of total listed securities with a market capitalisation of RM931bil or 65% or total market capitalisation.

In the first seven months of 2012, the trading volume of shariah-compliant securities increased to 148.4 billion units of the total 222.2 billion units traded.

Malaysia remains on the forefront of innovation and development of sukuk and continues to be the global leader in the sukuk market, accounting for 68% of total global sukuk outstanding as at July 31.

Malaysia retained its number one position for issuing sukuk, with a market share of 71% as at end-July. Bursa Malaysia remains the top sukuk listing destination, with 19 sukuk listed totalling RM99.6bil as at July 31.

During the first seven months of 2012, two Islamic fund management licences were approved, bringing the number of full-fledged Islamic fund management companies to 18. During the same period, an additional Islamic unit trust fund and four Islamic unit trust and four Islamic wholesale funds were launched.

As at end-July, the total net assets value (NAV) of Islamic unit trust funds stood at RM33bil and the Islamic wholesale funds at RM14bil.

Meanwhile, the number of Islamic REITs stood at three, with a market capitalisation of RM3.6bil as at end-July. Similarly, the Islamic ETF remained at one with total NAV of RM300mil.

Bursa Suq Al-Sila’ being the world’s first end-to-end Shariah-compliant commodity trading platform, has added Refined, Bleached and Deodorised palm olein as new commodity offering to meet greater demand from local and international players for commodity-based Islamic financing and investment.

Meanwhile, the Islamic banking business continued to expand in the first seven months of 2012.

Total assets grew 20.6% to RM469.5bil as at end July, representing 24.2% of the total banking system assets.

Total deposits rose 21.3% to RM362.7bil, or 26.1% as at end-July.

Total Islamic financing continued to grow 19.3% to RM294.2bil and accounted for 26.6% of total loans by the banking system.

Financing of the Islamic banking system was predominantly channeled to the household sector and accounted for 65%, or RM191.1bil as at end-July.

The takaful industry expanded further during the first seven months of 2012, with assets increasing to RM18.3bil and accounting for 9% of the total insurance and takaful industry assets as at end-July.

The bulk of takaful assets were concentrated in Islamic debt securities and Government Investment Issues, which amounted to 74.4% of total takaful assets.

(The Star Online / 28 Sep 2012)

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Malaysia still global runaway sukuk leader

KUALA LUMPUR: Malaysia is still the global runaway leader in the sukuk market,accounting for 68 per cent of the total global sukuk outstanding and 71 per cent market Share of the sukuk issued as at end-July. 

Bursa Malaysia remained the top sukuk listing destination, with 19 listed totalling RM99.6 billion (US$31.7 billion) as at end-July, according to the 2012/2013 Economic Report released by the Finance Ministry. 

Malaysia also remained among the global leaders in the Islamic finance management industry with the number of full-fledged Islamic fund management companies at 18 at end-July, it said.

The net asset value of Islamic unit trust funds at end-July stood at RM33 billion (RM28 billion at end 2011) and the Islamic wholesale funds at RM14 billion (RM7 billion at end-2011).

It said at end-July, 825 Syariah-compliant securities were listed on Bursa Malaysia, representing 89 per cent of the total listed securities with a market capitalisation of RM931 billion.

The report also said the Islamic banking business in the country will continue to expand, with total assets growing 20.6 per cent to RM469.5 billion as at end-July, representing 24.2 per cent of the total banking system assets (end-2011: 24.1 per cent).

The Takaful industry assets have increased to RM18.3 billion at end-July against RM16.9 billion last year.

It accounted for nine per cent of the total insurance and takaful assets as compared with 8.6 per cent in the January to July period.

(Berneo Post Online / 28 Sep 2012)

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