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Malaysia's $160 billion state pension fund will offer an Islamic investment option to its members by 2017 which would create the world's largest sharia-compliant fund of its kind, Prime Minister Najib Razak said. The move could funnel billions of dollars into sharia-compliant asset managers in Malaysia in a boon for the country's Islamic finance sector. Najib did not specify how big he thought the sharia-compliant standalone fund could be. The Employees Provident Fund (EPF) already invests about a third of its portfolio in stocks and bonds that comply with Islamic principles. Najib said the Securities Commission is also developing a blueprint for the country's Islamic fund and wealth management industry to help chart its strategic direction.

Maybank Investment Bank, Public Islamic Bank and RHB Islamic Bank have entered into an agreement with Impian Bebas Sdn Bhd to provide a 15-year, RM1.08 billion syndicated Islamic term financing. Maybank IB was appointed as the coordinating bank and joint lead arranger (JLA) for the Islamic term financing together with Public Islamic and RHB Islamic. Impian Bebas, a joint venture company between KLCC (Holdings) Sdn Bhd and Sapura Resources Bhd, is developing a commercial land known as Lot 91 at Kuala Lumpur City Centre (KLCC) into a mixed commercial development comprising of office tower, convention centre and retail podium.

Three Malaysian banks are to provide property company Impian Bebas Sdn Bhd with a 15-year 1.08 billion ringgit ($298.34 million) syndicated Islamic financing, Maybank Investment Bank Bhd, one of the banks involved, said. Impian Bebas was created from a partnership between property and investmemt groups KLCC Holdings Sdn Bhd and Sapura Resources Berhad. It is to develop a plot of land in central Kuala Lumpur, close to the city's Petronas twin towers. Maybank IB was appointed as the joint lead arranger with Public Islamic Bank Bhd and RHB Islamic Bank Bhd , Maybank said in a statement.

A rally in Malaysia’s two-year Islamic bonds lost its key driver after central bank Governor Zeti Akthar Aziz seemed to rule out an interest-rate cut. Malaysia’s borrowing costs are accommodative and the ringgit is undervalued, Zeti said. Maybank Investment Bank said there’s limited room for further declines in short-end yields, after they fell five times faster than those on 10-year notes in 2015. Franklin Templeton Investments Malaysia sees investors switching to longer tenors and forecasts no policy change this year. In the absence of any events that may lead to GDP falling below Bank Negara’s target, a cut in the overnight policy rate is considered unnecessary at this juncture.

The Government of Malaysia sold the world's first 30-year sovereign sukuk yesterday and, in the process, shrugged off domestic woes to establish a long-dated benchmark Islamic curve for other sovereigns to follow. The 30-year was part of a two-tranche offering of US$1.5bn in Islamic 144A/Reg S bonds to the international markets at a time when 1MDB's M$41.9bn debt woes threaten to derail the government's bid to rein in its fiscal and budget deficits. Malaysia stayed disciplined and kept to its initially targeted issue size of US$1.5bn split between the US$1bn 10-year note and the US$500m 30-year note. The 2025s, priced to yield 115bp over US Treasuries, rallied to 112bp/109bp and the 2045s, priced at 170bp, traded at 164bp/161bp.

Middle East buyers took up only 2% of the 30 year sovereign Sukuk issued by Malaysia (the 10 year issuance allocation consisted of 24% Middle East buyers). This low take up by Middle East can be read a few ways: 1. Sukuk primary subscribers remain hold to maturity investors, and a 30-year note was too long for Middle East buyers to commit to. 2. The drop in price of oil is hurting and Gulf investors are planning only up to a ten year horizon. 3. With the issuance being oversubscribed and attracting interest of over US$9 billion, Malaysia decided to be give Gulf investors only the shorter term ten year issuance. 3. CIMB and Standard Chartered did a great job of marketing to Asian buyers, whilst HSBC did a less stellar job in the Middle East market.

We are pleased to inform you that the July - December 2014 issue of the Malaysian ICM Bi-annual Bulletin published by the Securities Commission Malaysia (SC) is now available online at the Source link below.

The Government of Malaysia kicked off bookbuilding on its much-anticipated sukuk this morning, showing tenors of 10 and 30 years at guidance of around 135bp and 185bp over US Treasuries, respectively. The 144A/Reg S offering follows a week of roadshows that ended in New York yesterday evening. Based on guidance alone, the sovereign is providing a small pick-up, but, if demand proves robust, this is likely to be narrowed. Malaysia Sovereign Sukuk will be the issuer of the Islamic notes, and the Government of Malaysia, rated A3/A- (Moody's/ S&P), will be the obligor. Proceeds will be used for the government's general purposes, including the redemption of an existing US$1.25bn trust certificates due this year.

Malaysia Building Society Bhd (MBSB) has not initiated any new merger discussions with any organisation after the deal with CIMB Group Holdings Bhd and RHB Capital Bhd fell through. President and chief executive officer Ahmad Zaini Othman reaffirmed that MBSB has not received the green light from its shareholders to talk to any financial institution on a potential merger and acquisition. Meanwhile, Ahmad Zaini signed a Memorandum of Understanding (MoU) on behalf of MBSB with Credit and Debt Management Agency (AKPK). The MoU will enable MBSB to participate in AKPK’s debt management programme, which will see the latter extending its services.

CIMB Group Holdings Bhd. plans to sell a sukuk backed by a pool of loans, becoming the world’s first Islamic bank to sell the type of collateralised debt that contributed to the global financial crisis. The Malaysian lender is seeking to raise RM1 billion (US$275 million) from an offering of five-year notes this quarter, CIMB Islamic Bank Bhd.’s Chief Executive Officer Badlisyah Abdul Ghani said. The securitized debt will diversify funding options in the Islamic finance industry. CIMB Islamic’s new notes will be sold via private placement to investors who are comfortable with this type of security, CEO Badlisyah added.

The world’s first Islamic Asean Exchange Traded Fund (ETF) is enroute for listing on Bursa Malaysia on May 7. Investment management provider, i-VCAP Management Sdn Bhd (i-VCAP), today launched the prospectus for the Shariah-compliant ETF, which will be known as MyETF MSCI SEA Islamic Dividend (MyETF-MSEAD). Chief executive officer Mahdzir Othman explained that MyETF-MSEAD was an open-ended fund with an approved fund size of 500 million units. Investors can subscribe to the fund until April 22, at RM1 per unit with a minimum subscription size of 100 units.

A Taliworks Corporation Bhd joint venture has received the Securities Commission’s approval for the proposed issuance of the RM210mil Sukuk Murabahah. Taliworks said the Sukuk would be issued by Grand Sepadu (NK) Sdn Bhd, a joint venture in which it has a 75%. The proceeds from the issuance of the Sukuk Murabahah will be utilised to facilitate the roll-over of the short term syndicated bridging loan facility of up to RM200mil undertaken by GSNK into the Sukuk Murabahah and for working capital purposes. Taliworks said Hong Leong Investment Bank Bhd is the principal adviser and lead arranger for the Sukuk Murabahah.

Standard & Poor's Ratings Services has assigned its preliminary 'A-' issue rating to the proposed US dollar-denominated Sukuk trust certificates to be issued by Malaysia Sovereign Sukuk Bhd. The ratings agency said Malaysia Sovereign Sukuk Bhd. is a special-purpose company incorporated in Malaysia for issuing sukuk trust certificates. Under this arrangement, the issuer will enter into an asset sale and purchase agreement for not less than 26% of the issued amount, a grant of rights to services agreement for no more than 26% of the issued amount, and Murabaha agreement agreement for not more than 48% of the issued amount with Malaysia.

Turkey's Islamic banks are turning to Malaysia to cut costs as stubbornly high interest rates and slow trading hamper development of the domestic Turk?sh sukuk market. Kuveyt Türk Kat?l?m Bankas? A? plans to offer a five-year bond this week via private placement from a 2 billion ringgit ($539 million) sukuk program. Türkiye Finans Kat?l?m Bankas? A? was the first Turkish bank to sell the debt in Malaysia last year, issuing similar-maturity securities at a coupon of 6 percent. It paid 15.2 percent for a 2017 lira-denominated sukuk. Corporates from Indonesia and France are also coming to Malaysia to raise funds.

The Malaysian Islamic banking arm of HSBC Holdings has raised 750 million ringgit ($205 million) from the sale of 5-year Islamic bonds at a yield of 4.24 percent. The sale is the third tranche of the lender's overall 3 billion ringgit sukuk programme, sold using an agency-based structure known as 'wakala'. HSBC Amanah Malaysia Bhd pulled in strong demand, with the final book exceeding 1.38 billion ringgit at a bid-to-cover ratio of 1.84 times. Final pricing came at the low end of guidance, which started at 4.22-4.28 percent. As orders poured in, the guidance was tightened to 4.22-4.25 percent within a few hours after books were opened.

The Malaysian Islamic banking section of HSBC Holdings has tapped the Islamic bonds (sukuk) market last Friday, as part of a S$1.1 billion sukuk programme. According to Reuters, the bank planned to raise up to 500 million ringgit worth of sukuk, using an agency-based structure known as 'wakala'.
The transaction ist he first issuance of sukuk by HSBC Amanah Malaysia Berhad since October and September 2012. HSBC Amanah has appointed HSBC as lead arranger with Hong Leong Islamic Bank and Maybank Investment Bank as joint lead managers for the sale.

The Asian Development Bank (ADB) is stepping up efforts to assist member countries to use Islamic finance in areas such as infrastructure financing, ranging from technical assistance to providing credit guarantees. The Manila-based development lender sees Islamic finance as complementing its objectives to boost financial inclusion and promote financial stability. ADB had considered making a sukuk issuance of its own, but the focus is now on supporting member states’ use of sukuk for their public debt financing. AAA-rated ADB is also considering partial guarantees to boost the credit rating of sukuk from sovereign issuers.

Life insurer AIA Bhd sees a huge growth opportunity in the family takaful business and investment-linked products in Malaysia, a market viewed by the industry as being relatively under-insured compared with its more developed neighbours. To tap into this growth opportunity, chief executive officer Bill Lisle said that the group, which is in the midst of completing its integration with ING Group’s domestic insurance operations, plans to employ more full-time agents and leverage on new technology. He added that the company would leverage on its Point of Sale (iPoS) technology driven by iPad.

Petronas has announced price guidance levels for an offering of US dollar bonds, which includes a sukuk tranche. The senior unsecured notes of seven, 10 and 30 years have been announced to yield around 150bp, 175bp and 220bp over US Treasuries, respectively. The sukuk of five years is being offered at a yield of around 135bp over US Treasuries and be in a Wakalah structure. The 144A/Reg S senior unsecured notes are expected to be rated on par with the company at A1/A- (Moody's/S&P). Bank of America Merrill Lynch, CIMB, Citigroup, JP Morgan and Morgan Stanley are the active joint bookrunners. Deutsche Bank, HSBC, Maybank and MUFG are passive bookrunners.

RHB Islamic Bank Bhd has teamed up with Malaysian Technology Development Corp (MTDC) to provide financing for Bumiputera technology-based small and medium enterprises (SMEs) under the Bumiputera Expansion Fund (BEF) scheme. MTDC currently manages RM150 million fund for the BEF scheme via Bumiputera Agenda Steering Unit (Teraju). Under the pact, RHB Islamic will be the custodian of the fund, which will be placed in the bank’s commodity murabahah deposit-i account. The fund is expected to raise financing of at least RM300 million for eligible Bumiputera companies involved in biotechnology, green technology, nanotecnology and food technology.