Friday, October 31, 2014

RAM Ratings reaffirms Standard Chartered Malaysia’s AAA/P1 financial institution ratings

Published on 31 October 2014
RAM Ratings has reaffirmed Standard Chartered Bank Malaysia Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings, reflecting the Bank has a strong domestic franchise, healthy funding and liquidity profile, and sound capitalisation that provides a cushion against credit losses. Standard Chartered remains strategically important to Standard Chartered PLC (the Group), given the latter’s drive to expand in Asia. Thus, support from the Group is expected to be forthcoming, if required.
With a long operating history in Malaysia, Standard Chartered has an established franchise in retail banking, particularly in mortgages. Meanwhile, in serving large Malaysian corporates and multinationals, the Bank is able to leverage on its ultimate parent’s diverse network.
In 2013, the Bank’s gross impaired-loan ratio rose to 3.1% at year end (end-December 2012: 1.3%), mainly due to a few large corporate accounts. In addition, the Bank’s credit-cost remained elevated as impaired personal loans that had been mostly originated in 2011 continued to surface. As a result, Standard Chartered’s pre-tax profit for 2013 came in at a lower RM726.8 million (FY Dec 2012: RM942.3 million). Nevertheless, the Bank’s credit costs had declined noticeably in 1Q FY Dec 2014 – improving its bottom line – as the risk of further weakening in personal loans eased.
Standard Chartered’s capital buffer to cushion against any further asset quality deterioration remains sound; its common-equity tier-1 and total capital ratios stood at 10.2% and 14.2%, respectively, as at end-March 2014. Meanwhile, with a still-cautious stance on loan expansion, we anticipate the Bank’s loans-to-deposit ratio to remain within a comfortable range.

Media contact
Peter Kong
(603) 7628 1029

Maybank Asset Management debuts US-denominated global Sukuk fund

Islamic Finance news Alert

Friday, 31st October 2014

S&P 500 Shariah
Dow Jones Islamic World
MSCI World Islamic
FTSE Shariah All World
Russell - IdealRatings Islamic Global
11.58 (0.66%)
9.97 (0.35%)
4.63 (0.23%)
6.20 (0.34%)

Daily Cover

MALAYSIA: Maybank Asset Management (Maybank AM) has announced the launch of the Maybank Global Sukuk Fund, the firm’s debut US-denominated global Sukuk fund. Currently only available in Malaysia, the fund is aimed at investors with a moderate risk appetite and seeking regular income. Maybank AM anticipates that the new fund will complement and diversify investors’ existing investment exposures in ringgit-denominated Sukuk funds and equity funds.

With new global Sukuk issuance expected to top US$100 billion in volume by the end of the year, the global Sukuk market has welcomed the entry of a number of new issuers in 2014. According to Dealogic data, ringgit-denominated Sukuk leads the board with US$19 billion of Sukuk issued in the past year. US dollar-denominated Sukuk are not far behind however, with a share of US$17.9 billion of the market over the last 12 months and recent issuers such as Goldman Sachs, Hong Kong and South Africa choosing to utilize the currency for their issuances.

Nor’ Azamin Salleh, CEO of Maybank Asset Management Group, elaborates: “Increased demands and a burgeoning supply of global Sukuk funds are clear indications that global investors today understand Islamic instruments better and are seeking alternatives to other conservative options. With Malaysia in the limelight as an exemplary model to other jurisdictions, the launch of the fund is timely for us to ride on the wave of the growing momentum of increasing Islamic instruments acceptance. Despite offering the fund to Malaysia for now, we are in talks with our overseas counterparts to distribute the fund in other markets.”

The open-ended product offers investment in a portfolio of Sukuk and Islamic liquid instruments with a medium to long-term investment horizon. Opened this week, the fund has an initial offer period of 21 days, which ends on the 17th November and a minimum investment amount of US$1,000. As a global fund, the Maybank Global Sukuk Fund provides access to GCC economies and is also open to non-Muslim investors.

Treasury Products: An IFN Correspondent Report

New attitude in Islamic treasury products
The main challenge for Islamic banks is to create new treasury products based on Shariah compliant values and beliefs to both corporate and institutional clients. Some traditional treasury instruments include International Commodity Murabahah Investments (ICMI), Special Investment Accounts (SIA) for corporate and institutional investors and Islamic Negotiable Instruments of Deposit (INID).
IFN Global Trendswatch

Today's IFN Alerts

MALAYSIA: AirAsia to raise RM1 billion (US$304 million) through Sukuk Mudarabah program

GLOBAL: UK appeals to Qatar for further investment in infrastructure and development plans

KUWAIT: Burgan Bank gets regulator nod for KWD21.6 million (US$74.4 million) rights issue

GLOBAL: Affin Hwang Asset Management plans to launch Islamic products in Singapore early 2015 as it eyes the city-state's retail segment via ASEAN collective investment scheme

MALAYSIA: Assets of Malaysia's Islamic capital market expected to double to US$1 trillion by 2020, according to regulator

UAE: Dubai has the potential to become an Islamic economy hub, according to Malaysia's PM

GLOBAL: Investcorp and Bahraini sovereign fund Mumtalakat acquire US-based workforce management provider

GLOBAL: Growth opportunity for GCC Islamic banks lies in rising elderly population and internet banking among others, according to study

GLOBAL: Social welfare should continue to be a priority as the Islamic finance develops, says industry veteran

OMAN: Sohar Islamic signs MoU for provision of Shariah compliant home financing options to new home owners

SRI LANKA: Amãna Bank collaborates with Singer to provide easy payment plan

BAHRAIN: Arab Banking Corporation reports 11% growth in nine-month profit amid lower third quarter profit

UAE: Emirates REIT's nine-month net profit surges 111.3% to US$41.85 million

QATAR: Qatar Islamic Insurance Company reveals higher net profit for the first nine months of the year at QAR61.9 million (US$16.98 million)

UAE: Mashreq Bank registers 35% year-on-year increase in net profit for the first three quarters

EGYPT: Wethaq Takaful Insurance targets higher premium for current fiscal year as it posts 15% increase in premium for the quarter ended the 30th September 2014

SAUDI ARABIA: SABB Takaful introduces new online service allowing purchase of Takaful products over the internet

BAHRAIN: Fitch assigns 'BBB(EXP) rating to Bahrain Mumtalakat Holding Company's upcoming Sukuk program

MALAYSIA: Selangor State Development Corporation's Sukuk reaffirmed at 'AA3/Stable/P1' by RAM

REDmoney events

IFN Turkey Forum 2014
6th November 2014 (Istanbul)

IFN Saudi Arabia Forum 2014
17th November 2014 (Riyadh)

IFN Africa & Egypt Forum 2014
8th December 2014 (Cairo)

IFN Indonesia Forum 2015
22nd April 2015 (Jakarta)

IFN Asia Forum 2015
25th-26th May 2015 (Kuala Lumpur)

IFN Europe Forum 2015
9th-10th June 2015 (Luxembourg)

IFN Issuers Forum 2015
13th September 2015 (Dubai)

IFN Kuwait Forum 2015
5th October 2015 (Kuwait City)

IFN Iran Forum 2015
2015 (Tehran)

REDmoney training

Asset & Liability Management
9th - 11th November 2014 (Doha)

Advanced Sukuk & Islamic Securitization
10th - 12th November 2014 (Kuala Lumpur)

Accounting & Reporting for Islamic Financial Products
10th - 12th November 2014 (Kuala Lumpur)

Application of Islamic Principles in Shariah Fund Management
13th November 2014 (Kuala Lumpur)

Bonds & Fixed Income Instruments
16th - 18th November 2014 (Riyadh)

Islamic Treasury and Risk Management Products
17th - 19th November 2014 (Dubai)

Effective Derivative Product Operations
17th - 19th November 2014 (Kuala Lumpur)

Funds Transfer Pricing
1st - 3rd December 2014 (Kuala Lumpur)

Personal Data Protection Act
1st - 2nd December 2014 (Kuala Lumpur)

Takaful: Concepts, Products and Operation
8th - 10th December 2014 (Kuala Lumpur)

Funds Transfer Pricing
15th - 17th December 2014 (Hong Kong)

Advanced Sukuk & Islamic Securitization
15th - 17th December 2014 (Dubai)

Shariah Audit for Islamic Investment & Capital Market Instruments
12th - 13th January 2015 (Kuala Lumpur)

IFSA 2013 and Islamic Banking Deposits
22nd January 2015 (Kuala Lumpur)

Managing Operational Risk in Trade Finance
26th - 27th January 2015 (Kuala Lumpur)

Structuring Bank Payment Obligations
28th - 29th January 2015 (Kuala Lumpur)

Ethical Banking, Sustainable & Responsible Investment (SRI) Sukuk
10th - 11th February 2015 (Kuala Lumpur)

Islamic Finance Qualification
9th - 11th March 2015 (Kuala Lumpur)

Fixed Income Products & Bond Markets
9th - 10th March 2015 (Kuala Lumpur)

Understanding & Applying Structured Products
11th - 13th March 2015 (Kuala Lumpur)

Islamic Treasury and Risk Management Products
15th - 17th March 2015 (Riyadh)

Effective Sukuk Structuring
21st - 23rd April 2015 (Kuala Lumpur)

Structuring Islamic Trade Finance Solutions
26th - 28th April 2015 (Riyadh)

Structuring Sukuk & Islamic Capital Market Products
26th - 28th April 2015 (Muscat)

Managing Counterparty Credit Risk, Basel III and Recent Regulatory Issues
7th - 8th May 2015 (Kuala Lumpur)

Fixed Income Products & Bond Markets
11th - 12th June 2015 (Istanbul)

Managing Counterparty Credit Risk, Basel III and Recent Regulatory Issues
9th - 10th July 2015 (Hong Kong)

Islamic Finance Qualification
5th - 7th October 2015 (Kuala Lumpur)

FW: RHB FIC Credit Market Update - 31/10/14

31 October 2014

Credit Market Update

Investors Turned to HY for Pick-up; Value in SGD SUNHUN 5/21   

¨      Investors turned to HY in search for yield. In the USD credit secondary space, we saw better selling in Asia post relatively hawkish FOMC while Chinese papers bucked the trend as investors draw comfort from the Chinese Government’s efforts to prevent non-payment on public bonds. The only defaulted issuer on onshore notes, Shanghai Chaori Solar Energy Science & Technology has obtained funds from state-backed asset manager earlier this month to repay investors without any haircut, lifting investors’ sentiment. Papers traded yesterday include NOBLSP 15, DBSSP 37c15 and KBank 16 senior which widened a couple of bps. Buying in the CN space was seen on papers like FRANSH complex (17-21), CITICS 19 and CHIOLI 34. JACI HY spread outperformed, closing 4bps tighter (510bps) while IG spread inched 2bps narrower (184bps). iTraxx AxJ closed 3bps wider to 113bps. Going forward, we expect credit investors to continue to eye primary supply and HY space for pickup opportunities, further supported by expectedly softer US personal spending tonight. UST yields were a tad lower (-1bp) across the curve overnight despite stronger-than-expected US 3Q GDP print (actual: 3.5%, consensus: 3.0%).
¨      On the primary front, New World China Land (NR) printed USD900m 5.375% 5y at 5.45% yield, well inside initial guidance of 5.75% area.
¨      Active SGD primaries post-FOMC. The 3y and 5y SOR saw widening by c.5bps to 1.08% and 1.66% respectively as the 3y/5y spread marginally tightened by 1bp to 57.7bps. In the credit space, we observed buying attention on NOLSP, CENCHI and some O&G names (SWIBSP & KRISSP) while SPSP papers continued to trade a few bps wider. We opine that we will see some short-duration aversion post the slightly less-dovish FOMC statement released yesterday. In the primaries, Grand China Air (NR) issued a SGD250m 3y at a final price of 6%, Mapletree Commercial Trust (Baa2/-/-) printed a mini SGD50m 5y at final price of 2.65% while Tata International (NR) priced a SGD150m Pnc5 at final price of 6.65%.
¨      Modest demand for 3y-GII reopening; corporate bonds relatively active amid quiet primary. Demand for the MYR3.5bn 3y-GII reopening was moderate with BTC of 2.12x on average yield of 3.667%. Local govies activity surpassed MYR2.6bn where the 3y-GII topped the trading volumes with the yield edged upward to 3.67% (+1.5bps, MYR1.6bn), near to the reopening yield. Followed by 10y-GII on MYR520m trades settling at 4.121% (+0.6%). Transactions on the MGS benchmarks were lackluster yesterday. At the end of the day, 3y, 5y, 7y, and 10y-MGS last done at 3.467% (-3.7bps, MYR4m) 3.634% (+0.4bps, MYR45m), 3.745% (-2.3bps, MYR3m) and 3.791% (-1.1bps, MYR3m) respectively. Meanwhile, trading flows were focused in mid-duration bonds on robust total activity of MYR548m in the PDS market. Among the top traded were SabahDev 8/19 and Sime Darby 11/16 each saw MYR60m exchanged hands to close at 4.743% (+0.4bps) and 3.779% (-2.9bps) respectively while UEM 6/21 tighten marginally by 0.4bps settling at 4.671% (MYR50m).

Sun Hung Kai Properties Ltd, SUNHUN 5/21 (yield: 3.04%; SOR+105bps) (-/A+/-)
Capitaland Ltd, CAPLSP 6/20 (yield: 2.85%; SOR+100bps) (-/-/-)
Relative Value
We reiterate a preference for SGD SUNHUN 5/21 which has hovered at current yields since we first mentioned it in our Credit Market Update (dated 3-Oct). CAPLSP 6/20, on the other hand, has widened by c.10bps over the same period. Sun Hung Kai Properties’ outlook was upgraded on 22-Oct to A+/Sta from A+/Neg by S&P.
We continue to like Sun Hung Kai Properties as: 
1)     Exhibits robust and strong fundamentals. The property developer has a strong financial profile if compared to Capitaland, with LTM Total Debt/ EBITDA at 3.2x (Capitaland: 27.3x) and EBITDA Interest Coverage at 10.4x (Capitaland: 1.2x). This should enable it to comfortably ride through any dampness in the property market arising from HK unrest.
2)     Singapore’s property market expected to be sluggish in the near term. The 3Q2014 Singapore residential price index fell for the fourth continuous quarter (current: 208.1; previous: 209.4), with property prices expected to remain weak in Singapore. Sun Hung Kai has less exposure to the Singaporean property sales and rental market (SG: 2%; HK: 69%: China; 29%).
3)     Upgraded despite ongoing court case. S&P upgraded the companies’ outlook to stable (from negative) despite the ongoing court case involving its joint chairmen. We concur with S&P that the company’s financial profile has been buffeted by strong cash flow and low leverage despite market volatility.

Company/ Issuer
Australia and New Zealand Banking Group
(ANZ, Aa2/AA-/AA-)
ANZ’s FY14 (ended 30-Sep) net interest income registered 4% YoY higher at AUD7.03bn due to commendable loan growth of 8.0% (system growth: 6.1%), although group NIM has fallen to 2.13% from 2.22%. Gross impaired loans ratio improved to 0.55% from 0.88%. Provisioning for impaired loans also strengthened to 136% from 101%.
Marketweight. ANZ’s balance sheet strength generally improved. In addition to its better asset quality, loan/deposit ratio has reduced to 130% from 132%. Capitalization remains healthy, reflected by Tier 1 and Total capital ratios of 10.7% and 12.7% respectively.
Agricultural Bank of China Ltd (AGRBK, A1/A/A)
3Q14 loan growth came in at 10.70% (2Q14 system growth: 14.03% YoY). Net interest income increased 15.3% YoY while NIM rose 0.16pp to 2.91%. NPL ratio increased to 1.29% from 1.22% a year ago.
Marketweight. AGRBK’s credit metrics still appear healthy despite the deterioration in asset quality. Existing gross NPLs are significantly-provisioned at 335.1% while the bank’s loan/deposit ratio of 63.3% reflects ample liquidity.
Bank of China Limited (BOC, A1/A/A)
On a YoY basis, 3Q14 net interest income rose 14.68% to CNY238.8bn, effecting a 0.04pp increase in NIM to 2.26%, supported by a 11.0% growth in BOC’s loan base. However, NPL ratio moved up to 1.07% from 1.02% in the same quarter last year.
Maintain Marketweight. BOC’s credit metrics remain healthy despite the deterioration in asset quality. Existing gross NPLs are well-provisioned at 207.7% while the loan/deposit ratio of 71.7% reflects good liquidity.
DBS Group Holding Ltd (DBS)
(Moody: Aa1, S&P: AA-, Fitch: AA-)
Stronger 3Q14 performance, YTD NP +12% to SGD3.01bn, NIM improved 5bps to 1.67%, NPL decreased to 0.9% from 1.2% in 3Q13, stable capitalization ratio with Tier-1 and Total capital: 13.4% and 15.6% respectively.
Maintain marketweight. DBS’s credit metric remain solid on the back of its robust asset quality with NPL of 0.9% and strong capitalization with total capital of 15.6%.  
Oversea-Chinese Banking Corp. Ltd (OCBC)
(Moody: Aa1, S&P: AA-, Fitch: AA-)
Improved 3Q14 performance, YTD NP +48% to SGD3.09bn, NIM increased to 1.69% (+6bps), improved asset quality as NPL dropped to 0.7% (3Q13: 0.9%), weaker capitalization but still solid with Tier-1 and Total capital of 13.2% and 15.5% respectively.
Maintain marketweight. Asset quality for OCBC improved as NPL reduced to 0.7% (3Q13: 0.9%). Total capitalization remained robust at 15.5%.
United Overseas Bank Ltd (UOB)
(Moody: Aa1, S&P: AA-, Fitch: AA-)
Better 3Q14 result, YTD NP +10% to SGD2.46bn, NIM increased mildly to 1.72% (3Q13: 1.71%), NPL remained low at 1.2%, improved Tier-1 and Total capital to 14% and 17% respectively.
Maintain marketweight. UOB remains the top-capitalized bank in SG on total capitalization of 17%. NPL is low at 1.2% reflecting its healthy asset quality.
Bharti Airtel
(Bharti,  Baa3/BBB-/BBB-)
2Q14 revenue and EBITDA rose 7.13% and 12.11% YoY to INR228.5bn and INR77.1bn respectively. This was on the back of a 9.5% and 7.5% increase in India- and Africa-based subscribers respectively, compensating for an 8% decline in South Asia-based subscribers.  
Maintain Overweight. Bharti’s maintains healthy financial metrics in line with its current ratings. Its EBITDA margin remained healthy at 33.7% (2Q13: 32.2%) while debt/EBITDA ratio only marginally moved up to 2.06x (1Q14: 2.04x) a marginally better blended ARPU (India only) of INR198 (2Q13: INR192). Capex/revenue ratio has risen to 16.3% from 10.0% a year ago, mainly due to 2G and 3G data infrastructure needs.
Air Asia

Proposed to issue MYR1bn Perpetual Sukuk Programme (NR). Proceed to be utilized for capital expenditure (MYR550m), refinancing (MYR300m) and the remaining balance for working capital purposes.
Neutral. Minimal impact to gearing. Treating the Perpetual Sukuk as capital, the gearing ratio will improve to 1.9x (Jun-14: 2.2x) on pro-forma basis.
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