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American International Group Inc. is plotting its entry into Malaysia’s Islamic insurance market, lured by the country’s economic expansion and an industry that has grown more than fivefold in less than a decade. The insurer will start a Shariah-compliant reinsurance business by June and may eventually offer a fuller range of services, Antony Lee, chief executive officer at AIG’s Malaysian unit, said. In line with the continuing expansion of the takaful business, the demand for retakaful is expected to expand between 15 percent and 20 percent on an annual basis. However, a key challenge for retakaful companies is their limited ability to compete with their larger non-Islamic counterparts for business that requires a bigger balance sheet.

Bank Islam Malaysia (Bank Islam) plans to open 141 branches nationwide by year-end. Managing director Datuk Seri Zukri Samat said the new branches will be opened at Jalan Chan Sow Lin in Kuala Lumpur; Bandar Enstek in Negeri Sembilan, Bukit Ibai in Trengganu, Sri Damansara, Puchong and in Johor. Nine more branches are planned for 2015. In addition to the bank's branch expansion, Zukri said Bank Islam has also enhanced its distribution channels by establishing five urban business centres, improve on internet banking and mobile banking services as well as provide more than 1,200 self-service terminals nationwide. Due to the new set of terms and conditions introduced by Bank Negara on loans, the bank suffered a 10 per cent decline in assets and loan performance.

AmIslamic Bank has obtained approval from the Securities Commission Malaysia to establish a subordinated sukuk murabaha programme of up to 3 billion ringgit (US$903.60 million), which would represent the first Basel III-compliant sukuk in Malaysia. AmIslamic is given the flexibility to issue subordinated sukuk murabaha during the availability period of the programme based on the bank's funding requirements. The AmIslamic programme has a tenor of up to 30 years from the date of the first issuance of the subordinated sukuk murabaha. Each tranche to be issued shall have a tenor of at least three years, subject to their maturing on or before the expiry of the programme. AmIslamic's sukuk murabaha is rated AA3 by RAM.

US-based Islamic stock fund manager Saturna Capital Corp is selling its first plan in Malaysia, betting that Southeast Asian equities will weather a global emerging-market rout. The company, which has US$4.1 billion (RM13.6 billion) of assets under management globally, wants to raise RM100 million in the Malaysian fund's first year. The vehicle will invest in syariah-compliant companies in the region, focusing on building-material, healthcare and consumer stocks. The new ringgit-denominated fund will target local and overseas high net worth individuals and institutional investors. The outlook for Islamic fund management in Malaysia is still good, after a constant growth at an average rate of 25 per cent a year since 2009.

After outsourcing its information technology (IT) infrastructure for about five years, Syarikat Takaful Malaysia has decided to bring it back inhouse. The company has adopted Microsoft System Center 2012 to manage its IT infrastructure and end-user computing. It said that the decision to go inhouse has shown immediate benefits, and it has been experiencing a 40 per cent improvement in response time and 27 per cent in cost reduction. Takaful’s adoption of Microsoft System Center was mainly helped by system integrator Redynamics Asia System Management. The cost savings the company achieved from going inhouse can now be used to help the company expand into other areas.

Bank Islam Malaysia expects a 20% year-on-year growth for its financing assets this year led by its retail financing business with demand for individual and housing credit. Bank Islam will also focuse on growing its fee-based income which had been very encouraging in the recent period. Cost is a major concern for banks. There has been some softening in loan demand. Bank Islam has originally been concentrating more on owner-occupied houses rather than speculation-based buying. The bank is planning to open at least five new branches in Malaysia by the end of this year with the first one being in Kelantan. Currently, the bank has 133 branches and a total retail deposit of about RM8 billion.

Bank Muamalat Malaysia expects financing for small and medium enterprises (SMEs) to contribute between 15% and 20% of its total financial portfolio for 2014. CEO Mohd Redza Shah Abdul Wahid said this will represent up to RM1.2 billion of its loans. He said the bank’s loan growth for the consumer segment was 18%, however, it was reduced to 12% this year. This is due to the bank's consumer segment softening after Bank Negara Malaysia’s (BNM) measures especially on home financing and personal financing. Besides, Bank Muamalat signed a MoU with Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry (KLSICCI) and Kuala Lumpur Malay Chamber of Commerce (KLMCC). It will help the institution to increase its customer base for SME financing.

The International Islamic Liquidity Management expanded its sukuk issuance programme today by auctioning US$860 million (RM2.85 billion) of three-month Islamic bonds at a yield of 0.55635 per cent. The issue brings the total amount of the IILM’s outstanding sukuk to US$1.35 billion. Its programme, launched last year, envisages issuance increasing eventually to as much as US$2 billion. The newest issue was sold to nine primary dealers from Asia, the Middle East and Europe. Since the programme’s launch, primary dealers have held on to the IILM instruments after auctions and there has been little if any secondary market trade in them.

Malaysia’s Islamic bond yield rose at its first sale of the debt in 2014 as the Federal Reserve’s stimulus cuts push up global borrowing costs. The April 2019 notes, a reissue of sukuk originally sold in October, yielded 3.953 percent, compared with 3.91 percent in the secondary market. The rate on the existing securities has since climbed to 3.97 percent, the highest level since Jan. 6. While yields climbed, today’s 3.5 billion ringgit ($1.1 billion) offering still attracted orders of 1.96 times, the highest ratio since September. Malaysia plans to hold 28 bond sales this year, including 12 for Shariah-compliant securities and 16 for non-Islamic notes.

DRB–Hicom has yet to finalise the new party for its divestment of a 30 per cent stake in its banking unit, Bank Muamalat Malaysia. The dilution of the stake in the country’s third largest Islamic lender has been a prolonged process as the conglomerate is looking into a strategic partnership or an exercise that could add value and increase the bank’s penetration into the Islamic financial business in Malaysia. It was reported earlier that Bank Negara Malaysia (BNM) had mandated DRB-Hicom to dilute some of its 70 per cent stake in Bank Muamalat. It was also reported that DRB-Hicom had negotiated with Affin Holdings on a potential acquisition but talks were called off due to pricing issues. The bank remains sidelined as it currently has no new products to introduce or new branches to launch.

The US Federal Reserve will likely continue trimming its asset purchases by $10bn a month – from $85bn a month – until it stops altogether later this year.This will mean that historically low interest rates and fixed income yields could rise as the globe’s economies start to recover and inflation kicks in. Borrowers want to lock in those low rates now and this means a rush to issue. Data from Bloomberg show that planned Sukuk sales in Malaysia for January are already double those for the whole of January 2013. Corporates have announced $1.7bn in Sukuk compared to the $700m total sold in January last year. Depending on what happens to interest rates, global Sukuk issuance volumes seem likely to wane as rates rise and the cost of borrowing increases. The other major fear is that the China debt bubble will burst and send shockwaves through the world’s economies with the epicentre on South East Asia.

The South China Sea reportedly holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas; some experts estimate even more. Unfortunately, there's no clear way to define who "owns" these resources, as China, Vietnam, Malaysia, Taiwan, the Philippines, Indonesia and Brunei all believe some, or all, of these resources belong to them. Many of these countries are forced to import a considerable percentage of their overall demand. Investors need to keep an eye on Southeast Asia, and the South China Sea in particular. The oil in place under that sea, as well as its importance as a trade route, could push some nations to the boiling point as they rush to secure their supply of oil. That's a catalyst for some stocks, while a big risk for others.

The Islamic Development Bank (IDB) is considering developing an Islamic Centre of Excellence at the Tun Razak Exchange in the greater Kuala Lumpur in three to five years. The centre of excellence will reportedly provide services in Islamic finance and banking-related transactions. The project will be developed in collaboration with the Malaysian government.

The infrastructure projects to be launched in Asean and the Middle East and North Africa (Mena) regions will continue to put Malaysia as the champion in the sukuk market next year, according to CIMB Islamic Bank. Its Executive Director and Chief Executive Officer Badlisyah Abdul Ghani said the sukuk market will perform positively in 2014, with a projection of between US$42bil (US$1=RM3.25) and US$48bil of new issuances led by Malaysia and Saudi Arabia. CIMB Islamic has so far topped the lead manager league table after arranging RM9.70bil worth of sukuk issuance, garnering a 25.9% market share. Out of 20 countries worldwide, Malaysia was ranked third in terms of total Shariah-compliant assets at US$196.820mil, with 41 institutions offering Shariah services, representing 63.7% of the total population.

U.S.-based MetLife will buy 51% stake and 49% stake in AmLife Insurance Berhad (AmLife) and AmFamily Takaful Berhad (AmTakaful), respectively, from Malaysia’s AMMB Holdings. The remaining parts of the firms will be owned by AMMB. The deal, worth $249 million, will help MetLife to expande its reach into the Southeast Asia insurance markets. The proposed transaction follows recent announcements from New York-based MetLife of the formation of a joint venture with Bank for Investment and Development of Vietnam and opening of a representative office in Myanmar. The deal is subject to regulatory approval.

The global Islamic financial industry is expected to grow to US$2 trillion next year from US$1.3 trillion currently, propped up by growing demand from non-conservative countries, Malaysia's Deputy Finance Minister Ahmad Maslan said. The Islamic financial industry will expand because of the stability of the Islamic financial system. The system is not shaken by the economic downturn anywhere in the world, he added. Furthermore, the Islamic financial system was also fairer such as in terms of profit distribution, Ahmad said. In Malaysia, the growth of Islamic Finance would benefit both Muslims and and non-Muslim consumers, he said.

The Kuala Lumpur-based Islamic Financial Services Board (IFSB) has published guidelines on capital adequacy for Islamic banks and risk management of takaful as the industry body expands its activity and membership base. Revised guidelines detail criteria for using sukuk as Tier 1 and Tier 2 regulatory capital, those for takaful firms outline issues faced by Islamic insurers, including the risk that their products become non-compliant with Shariah principles, and describe best practices to supervise their funds and disclose information. Work now shifts to the IFSB’s 16th guideline covering the supervision of Islamic finance institutions, helping tighten regulatory oversight of industry practices. The IFSB council will be chaired in 2014 by the managing director of Brunei’s monetary authority, taking over duties from the Qatar’s central bank governor.

Great Eastern Takaful aims to be profitable by end-December and be among the top three players in the local takaful business, according to Chief Executive Officer Zafri Ab Halim. The company has registered growth which was mainly attributed to improvements from its corporate agency and bancatakaful channel. Great Eastern Takaful will continue growing its agency distribution via direct and dual agency as a key distribution channel as well as develop and launch products catered primarily for the Muslims' market. The joint-venture company between Great Eastern Holdings Ltd unit, I Great Capital Holdings Sdn Bhd and Koperasi Angkatan Tentera (M) Bhd, yesterday changed its status from a private to a public entity in line with the requirement of the Islamic Financial Services Act 2013.

Malaysia's BIMB Holdings will issue a RM1.7 billion ringgit Islamic bond to help raise the US$884 million (RM2.835 billion) it needs to buy the remaining 49% stake of Bank Islam. The 10-year sukuk will be sold to Tabung Haji, BIMB's biggest stakeholder, in a private placement. The bond is made available for the six months to May 27, 2014. IMB's plans were initially rejected by the central bank due to a proposal to secure the sukuk with shares of the company. BIMB in August announced plans to acquire the stake it does not own in Bank Islam held by Dubai Group and Tabung Haji.

Malaysia Building Society Bhd. (MBSB) will sell the nation’s first covered Islamic bonds to be backed by receivables, offering RM495 million of the debt next month. The sale will be the first portion of a RM3 billion programme announced last month and will be issued by Jana Kapital Sdn, a special-purpose company. The securities have been assigned an AA1 ranking by RAM Rating Services Bhd in Kuala Lumpur. The offer is part of the company’s strategy to expand its business and to cut costs to sustain earnings growth. The company will report record profits this year as its nine-month net income of RM464 million has already surpassed 2012’s full-year total of RM446.7 million.