IslamicFinance.de

Johor state investment arm Johor Corp will list its Islamic real estate investment trust (REIT) known as Al-Salam on the Main Market of Bursa Malaysia on Sept 22. Al-Salam REIT is seeking to raise gross proceeds of RM252.36 million arising from the issuance of 252.36 million offer units, based on an offer price of RM1 per unit, which will account for 43.5% of the trust. The bulk or RM242.86 million of the proceeds raised from the initial public offering (IPO) will be used to pay for the purchase of five properties that will make up the initial portfolio.The Islamic REIT will primarily comprise commercial retail, office and industrial purposes as well as real estate-related assets.

Shariah- based funding is available now to support viable green technology projects, says Bank Islam Malaysia Bhd Managing Director Datuk Seri Zukri Samat. He said the bank would use every opportunity to promote Shariah-based financial products and services for project financing transactions, in line with the government's aim of establishing Malaysia as a leader in Islamic finance. Zukri said Bank Islam had completed the project financing transaction exercise for Kerian Energy via the syndicated Islamic financing facilities of RM121.44 million under the Shariah principle of Tawarruq. He also said the bank was looking towards re-balancing its consumer banking and corporate banking portfolio at a ratio of 70:30 by year-end.

Bank Islam Malaysia Bhd, which has a 26% corporate and commercial banking portfolio, is looking to raise the figure to 30% by end-2015 to reduce its dependency on consumer banking from 74% to 70%. It is looking to further tap the green technology sector, particularly hydropower projects, as well as the infrastructure sector, to up the commercial banking contribution. Managing director Datuk Seri Zukri Samat noted that the bank intends to focus on organic growth for the time being, even as it looks into the possibility of a merger and acquisition (M&A) beyond 2017. He also said Bank Islam’s overall financing growth is expected to be lower for its financial year 2015.

Malaysia’s benchmark Islamic borrowing costs are seen rising to a record as global investors exit the nation’s government and corporate bonds at the fastest pace in three years. The yield has climbed 16 basis points to 4.20 percent since July 3, when a Wall Street Journal report into Prime Minister Najib Razak’s finances plunged the country into political turmoil. Manulife Asset Management Services Bhd. says the unprecedented 4.5 percent is in sight this year, compounded by falling commodity prices and a potential U.S. interest-rate increase. Pheim Asset Management Asia Bhd. also sees that level being reached as the ringgit slides.

The Malaysian unit of Toyota Motor Corp said it plans to set up a 2.5bn-ringgit ($655mn) programme through its local financing arm Toyota Capital Malaysia in order to raise funds via both Islamic and conventional bonds. While Toyota has not revealed how much of the programme will be covered by Islamic bonds, it is expected that this part will be at least 1bn ringgit ($262mn) which is the size of Toyota Malaysia’s previous and first-ever sukuk programme, which was set up in 2008 and matured in June 2015. Proceeds will be used to strengthen the funding structure of Toyota Capital Malaysia to meet its mid-term expansion plans.

Malaysia fund house Maybank Asset Management has chosen Standard Chartered as its trustee for the first sharia-compliant fund that has been approved for Asean passporting. The Maybank Bosera Greater China Asean Equity I-Fund was approved by the Securities Commission of Malaysia for distribution under the Asean Collective Investment Scheme (CIS) in March. The fund was subsequently launched for sale in the Malaysian market in April. Maybank AM has two funds from its Singapore office that are also waiting to be passported in Malaysia and Thailand. But the contract with StanChart only covers Maybank AM Malaysia.

Lloyd's of London plans to apply for an onshore reinsurance licence and open an office in Malaysia, as part of its push into emerging markets. The licence application follows confirmation from the British and Malaysian governments. It is also targeting the Islamic insurance market. Lloyd's chairman John Nelson said around $130 million in business was written for Malaysia, but said an onshore presence would likely enable that figure to grow, without giving a target. Lloyd's said the licence is an opportunity to develop its marine, energy, construction, engineering and liability business, as well as introduce new products to the market.

Malaysia Building Society Bhd (MBSB) is on track to obtaining a full-fledged Islamic banking licence, that will come together through a merger with Bank Muamalat Malaysia Bhd. Plans were being laid out to realise MBSB’s goal to get a full-fledged Islamic banking licence. This comes seven months after news-grabbing three-way merger between MBSB, CIMB Group Holdings Bhd and RHB Capital Bhd fell through in January. In May this year, MBSB was reportedly eyeing Kuwait Finance House (M) Bhd as an option for a merger exercise. One of MBSB’s setbacks as a non-conventional bank is its inability to tap low-cost funds from the money market that are accessible to conventional banks.

Malaysia attracted the weakest demand at a sovereign sukuk auction in almost eight months amid concern it will need to bail out state-owned investment company 1Malaysia Development. The Treasury sold 3.5 billion ringgit ($916 million) of Shariah-compliant bonds due October 2025 to yield 4.105 percent on Thursday. The bid-to-cover ratio of 1.85 was the lowest since Dec. 5. Prime Minister Najib Razak removed his deputy Tuesday as he seeks to head off a public rift within his cabinet over his handling of financial probes into debt-ridden 1Malaysia Development Bhd. The entity’s borrowings totaled 41.9 billion ringgit ($11 billion) at the end of March 2014.

The resignation of Badlisyah Abdul Ghani, the chief executive officer of CIMB Group Holdings Bhd’s Islamic unit, added to clouds over Malaysia’s sukuk market, amid a probe into a state investment company and a renewed global commodity rout. He said that he resigned “to explore new opportunities”, declining to comment on speculation the decision was related to the investigation of 1Malaysia Development Bhd. CIMB, Malaysia’s lead Islamic bond underwriter for the past eight years, will now have to find and groom a replacement just as sukuk sales in the world’s biggest market dropped 36% in 2015 to a five-year low. Political uncertainty caused by the probes, falling commodity prices and a looming US interest-rate increase may deter issuers.

The Shariah-compliant banking sector in Malaysia, already among the largest in the world by assets, is forecast to grow at an average annual rate of 18% over the next years to reach a value of $296.26bn in 2019. This is the prognosis contained in the Malaysia Islamic Finance Report 2015 revealed at a press conference in Kuala Lumpur on June 30. The report, commissioned by Malaysia’s CIMB Islamic and produced in partnership with Jeddah-based Islamic Research and Training Institute (IRTI), the General Council for Islamic Banks and Financial Institutions based in Manama, Bahrain and Thomson Reuters, also projects that takaful contributions in Malaysia will grow at an average 18.2% year-on-year to reach a market share of 17.96% of total insurance premiums by 2019, equal to $5.51bn.

CIMB Islamic Bank’s chief executive officer and board member Badlisyah Abdul Ghani will resign all his posts effective Aug 15, 2015. Badlisyah also heads CIMB Group Bhd’s Islamic banking and finance franchise. In a statement to Bursa Malaysia, CIMB Islamic Bank’s board of directors announced it has elected Mohd Shafri Shahul Hamid as the person-in-charge of the bank and agreed for the group nomination and remuneration committee to start the process of identifying Badlisyah’s replacement. Badlisyah courted controversy last week when he questioned the validity of documents used by The Wall Street Journal (WSJ) in its recent reports which claimed billions of ringgit were deposited into accounts belonging to Prime Minister Najib Abdul Razak.

A special task force comprising the Attorney-General's Chambers, police, anti-corruption authorities and Bank Negara is now probing the claim made by The Wall Street Journal (WSJ) on July 2. WSJ has posted documents on the money flow into Najib's accounts on the Internet to support its report. WSJ's report centres on some US$700 million (RM2.67 billion) funnelled into two of Najib's accounts at AmBank in Kuala Lumpur. The money was transferred in five separate deposits from two originating points. According to WSJ, the largest portion of the money – US$681 million – was transferred to Najib's accounts in March 2013, ahead of the May general election (GE13). Najib has denied taking funds for personal gain.

The Malaysian Attorney-General's Chambers (AGC) on July 9 said that six bank accounts, ordered frozen on Monday as part of a 1Malaysia Development Berhad (1MDB) probe, were not linked to the prime minister, as his accounts with AmBank Islamic had already been closed by then. The task force is investigating allegations in a report by The Wall Street Journal (WSJ) that up to US$700 million from state-owned fund 1MDB had been transferred to Mr Najib for personal use. Mr Najib refuted the accusations in a statement on Wednesday, reiterating he had never obtained funds from 1MDB for his personal gain. The AGC also detailed items seized in a raid of the 1MDB office in Kuala Lumpur on Wednesday, including minutes of meetings of the 1MDB Board of Directors.

The strong demand for Islamic debt papers by foreigners appears to be reaching a plateau. According to analysts, the demand for Islamic bond papers from foreign investors in the last one year has pushed up prices and subsequently the yields have come down. Standard & Poor’s (S&P) Ratings Services foresees the global sukuk market heading towards a correction in 2015 after Bank Negara stopped issuing the bond earlier this year. Bank Negara’s move leaves the door open to issuers such as the International Islamic Liquidity Management Corp and the Islamic Development Bank to step up their issuance and provide the industry with liquidity, thereby contributing to the development of an Islamic yield curve.

CIMB Group chairman Datuk Seri Nazir Razak has ordered an internal inquiry on a senior executive of its Islamic banking unit who yesterday accused US-based Wall Street Journal (WSJ) of being duped by doctored documents in its explosive money trail exposé on 1Malaysia Development Berhad (1MDB). Nazir disclosed the action in a late night post on his Instagram account, after news portal Malaysiakini reported CIMB Islamic Bank chief executive officer Badlisyah Abdul Ghani for his erroneous analysis on WSJ in his closed-circuit Facebook page. Badlisyah has admitted to making an error in his analysis of the WSJ documents, which the daily purports were based on an ongoing government investigation on 1MDB, adding that he has also corrected his initial Facebook post.

The government uses effective approach and adopts efficient and integrated structure to develop Malaysia as an international Islamic financial centre, said Deputy Finance Minister, Datuk Chua Tee Yong. He said the approach was due to the strong cooperation among various ministries, agencies, private sector and other stakeholders via the Malaysia International Islamic Financial Committee (MIFC) committee chaired by Bank Negara Malaysia governor. Asyraf Wajdi wanted to know whether the Finance Ministry has plans to develop the Islamic financial system in Malaysia by establishing ‘local centres’ as in Qatar, Bahrain, UK and Singapore. Chua said the plan and strategic issues would be discussed by MIFC exco to facilitate the administration and smooth implementation of the MIFC initiative.

RAM Rating Services has reaffirmed the A2/Stable/P1 financial institution ratings of Bank Muamalat Malaysia Bhd. The ratings agency had on Monday also reaffirmed the bank’s A3/Stable rating of its RM400mil Islamic subordinated Sukuk programme (2011/2026). The one-notch difference between the bank’s long-term financial institution rating and that of its subordinated Sukuk reflects the subordination of the debt facility to the bank’s unsecured obligations, it said. RAM Ratings said the bank’s asset-quality indicators had weakened during the period under review. Its gross impaired-financing (GIF) ratio had increased to 3.0% as at end-December 2014 (end-March 2014: 2.7%), with the largest upticks in home and personal financing.

HSBC Amanah Malaysia Bhd has launched its Islamic Socially Responsible Unit Trusts, the first of its kind in the Islamic banking landscape in Malaysia. The company said the unit trusts are tailored for customers who want to invest and at the same time make a difference in the communities they live and work in. A portion of profits earned from the Socially Responsible Unit Trust proposition will be channelled to the Teach For Malaysia foundation. A contribution of RM10 will be made for every customer placement below RM50,000 into selected funds of the unit trusts and will double to RM20 for placement above or equal to RM50,000. Chief Executive Officer Rafe Haneef said the unit trusts may provide a good return on investment for customers while extending the benefit to children who suffer from education inequity in Malaysia.

The Islamic Research and Training Institute (IRTI) is pleased to announce the launch of the Malaysia Islamic Finance Report 2015, which is the latest in the Islamic Finance Country Reports (IFCR) series. You can download your copy of the Malaysia Islamic Finance Report 2015 here: http://www.irti.org/English/News/Documents/406.pdf You may also find the introductory video in YouTube: https://www.youtube.com/watch?v=IuJd-hTTnCE