Saturday, November 30, 2013

Asia Bond Monitor November 2013

Emerging East Asia countries should use the window of opportunity opened by the delay in US policy normalization to strengthen their economies and financial systems, the latest quarterly Asia Bond Monitor from the Asian Development Bank (ADB) urges. Emerging East's LCY bonds outstanding in 3Q13 grew 2.4% quarter-on-quarter and 12.5% year-on-year to reach US$7.1 trillion.

The 2013 AsianBondsOnline Bond Market Liquidity Survey results show that the average bid ask spread for government bonds in the region as a whole remained the same as in 2012, while turnover ratios for government bonds fell in most markets. This year's survey identified investor diversity to be the most important structural issue for markets in the region and received 106 responses from government bond market participants and 72 responses from corporate bond market participants.

Al Baraka Banking Group affirms position in the third quarter with US$19.9 billion in total assets - IFN

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BAHRAIN: One of the industry’s emerging heavyweights, Al Baraka Banking Group, has reported its financials for the third quarter of 2013. The Shariah compliant financial institution has announced a hike in its net income to US$197 million, registering an 8% increase in comparison to the same period last year. As of the 30th September, total assets of the group stood at US$19.9 billion with financing and investments accumulating to US$15 billion and total equity accounted at US$1.95 billion.
Commenting on its financials, Shaikh Saleh Abdullah Kamel, the chairman of the group said: “Thanks to the Islamic banking business model, Al Baraka Banking Group has not been affected by the crisis, further endorsing the soundness of the group's business strategies both short and long-term." In the World Islamic Banking Competitiveness Report by Ernst & Young Bahrain was, together with Malaysia, named as one of the leading Islamic finance centers in the world. The kingdom’s Islamic banking proposition is said to be guided by: 1) regulatory clarity across major existing and emerging Islamic finance areas; 2) empowering institutions through skill-development; 3) consolidation among market players; 4) Standard-setting initiatives facilitated through industry infrastructure institutions.
A Turkish subsidiary of the bank, Al Baraka Turk Participation Bank, recently concluded the largest Islamic deal in Turkey. The syndicated Shariah compliant Murabahah financing raised US$430 million with participation from a total of 23 banks from 15 different countries. Al Baraka is an Islamic wholesale bank licensed by the kingdom’s central bank and listed on the Bahrain Bourse as well as NASDAQ Dubai. The group has over 436 branches located in Algeria, Bahrain, Egypt, Jordan, Iraq, Indonesia, Lebanon, Libya, Pakistan, Saudi Arabia, Sudan, South Africa, Syria, Turkey and Tunisia.

Reliance Asset Management Malaysia reported to have suspended operations and resigned mandates for Islamic funds - IFN

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MALAYSIA: Reliance Asset Management Malaysia (RAMMy) is reported to have ceased its operations in Malaysia. Sources have conveyed to Islamic Finance news that the asset management firm has already reported its suspension to the Securities Commission Malaysia, although nothing has yet been officially announced by the regulator. RAMMy is a 100% subsidiary of Mumbai-based Reliance Capital Asset Management, which is in turn is part of Indian conglomerate Reliance Anil Dhirubhai Ambani Group.
Reasons for the cessation are yet to be revealed, however it has been speculated that the holding company is in the midst of restructuring. Other possible causes could be difficulties experienced in raising sufficient funds under management to create a sustainable enterprise. According to a confidential source speaking to Islamic Finance news however, RAMMy is still said to be considering its options in Malaysia.
Following its incorporation in 2009 the firm launched three funds: the WSF Reliance Global Shariah Growth Fund, a fund launched in Guernsey under the World Shariah Funds platform; the Reliance India Shariah Growth Fund; and the Reliance China-India Shariah Growth Fund, both incorporated in Mauritius.
According to its annual report, Reliance Capital made a loss of INR556 million (US$8.78 million) on a write-off related to its subsidiaries in the UK and Malaysia. The company invested approximately INR639 million (US$10.09 million) therein and has since incurred consistent losses over the past few years. Taking into consideration the poor performance and the discouraging business prospects, the operations of these two subsidiaries are thus believed to be scaling down.

Twitter IPO deemed Shariah compliant - IFN

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GLOBAL: The Twitter IPO has generated much interest, not least from those buyers concerned with ensuring their investments are Shariah compliant. Such was the interest in the weeks leading up to the offering on the NYSE that IdealRatings conducted a Shariah screening which concluded that Twitter stock was considered Shariah compliant and eligible for investment as per AAOIFI guidelines.
The IPO was deemed a success in comparison with that of Facebook last year, with Twitter selling 70 million shares at starting at US$26 each on Thursday morning, jumping 73% to close at US$44.90, raising US$1.82 billion. While it’s not possible to assess how many of those shares were bought by Islamic investors encouraged by the news that the stock was indeed considered Shariah compliant, it drives home the point that there are gains to be made on both sides of the equation, and builds a case for obtaining more information about the potential successes in non-traditional investment targets.
Technology is an area that is key in Islamic finance in terms of operations and is also an area that is wide open for development and investment. The potential for crossover with conventional, non-specifically Islamic products is an option that widens the field considerably. However the concern is that there is no global standard for the rules that they must meet in order to be considered suitable, which is where the standards set by AAOIFI and IFSB come into play even though these are neither universally recognized nor yet enforced by law.

Friday, November 29, 2013

AsianBondsOnline Newsletter (18 November 2013)


News Highlights - Week of 11 - 15 November 2013

Bank Indonesia's (BI) Board of Governors decided to raise BI's benchmark interest rate by 25 basis points (bps) to 7.5% at its meeting on 12 November. BI also raised the lending facility rate and deposit facility rate by 25 bps each to 7.50% and 5.75%, respectively. In making its decisions, BI took note of the persistently large current account deficit amid concerns of widespread global uncertainty. Meanwhile, The Bank of Korea's Monetary Policy Committee decided on 14 November to maintain the base rate at 2.50%.

*     Hong Kong, China's GDP grew 2.9% year-on-year (y-o-y) in 3Q13.  Real gross domestic product (GDP) growth in Japan increased 0.5% quarter-on-quarter (q-o-q) in 3Q13.

*     Malaysia's economy recorded a y-o-y growth rate of 5% in 3Q13- the fastest pace in three quarters-from a revised 4.4% in 2Q13 driven by recovery of exports and strong domestic demand. Industrial production growth in Malaysia eased to 1.0% y-o-y in September  due to a fall in mining output. On a seasonally adjusted basis, Singapore's retail sales increased 0.5% month-on-month (m-o-m) in September.

*     Indonesia's current account deficit narrowed to US$8.4 billion (equivalent to 3.8% of GDP) in 3Q13. Japan posted a current account surplus of JPY587 billion in September, up from the JPY162 billion posted in August. Malaysia's current account surplus widened to MYR9.8 billion in 3Q13 from MYR2.6 billion in the previous quarter.  In the Philippines, merchandise exports rose 4.9% y-o-y in September to US$5 billion. Personal remittances from overseas Filipinos rose 6.6% y-o-y January-September to reach US$18 billion,

*     In the Republic of Korea, domestic banks' capital adequacy ratio under the Bank for International Settlements Basel II standards climbed to 14.25% at-end September from 13.87% at end-June.

*     On 12 November, the National Assembly of Vietnam (NA) approved the 2014 economic indicators for the 2014 budget, with a state budget deficit of VND224 trillion or 5.3% of GDP. The largest portion of the state budget was allocated for development investments and debt payments.

*     China Development Bank (CDB) last week said it plans to issue an exchange-listed bond.  The bond listing, if approved, will be the first exchange-listed bond from a bank.  The China Banking Regulatory Commission and China Securities Regulatory Commission  announced  on 8 November that banks will be allowed to issue bonds on the exchange. However, they said that the rules are meant to allow banks to issue bonds to boost regulatory capital.

*     The Industrial and Commercial Bank of China issued a CNH1.3 billion bond last week with a 3-year maturity and a coupon of 3.35%, as well as a CNH700 million bond with a 5-year maturity and a  coupon of 3.75%. Singapore's United Overseas Bank priced a SGD500 million Tier 1 perpetual issue to yield 4.75% last week. Vietnam Asset Management Company issued zero interest rate 5-year special bonds for Saigon-Hanoi Commercial Joint Stock Bank  with a total value of VND30.4 billion.

*     Government bond yields rose last week for all tenors in Indonesia, and for most tenors in the PRC, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand and Viet Nam. Yield movements were mixed in Hong Kong, China. Yield spreads between 2- and 10- year maturities narrowed in Indonesia, the Philippines and Viet Nam, while spreads widened in most other emerging East Asian markets.

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