A risky business

Rapids • Deals • News • Takaful • Asset Management • Ratings • Moves
26th November 2014 (Volume 11 Issue 47)
A risky business Welcome to the last issue of November, and as the year draws ever closer to its end, IFN continues to bring you the latest news and most innovative features from the industry around the world. This week, our cover story explores one of the most interesting concepts to hit the market: the complex and challenging issue of Shariah compliant Coco bonds, which could provide an intriguing new avenue for liquidity management – but whose high risk profile could also represent a dangerous temptation for unsophisticated investors. Our IFN reports continue with the theme of risk and reward, exploring at the slow but sure trajectory of Islamic repos; along with a look at a new look at an old favorite in the funds industry, the latest player in Pakistan’s Takaful sector, Indonesia’s latest gambit in its Islamic finance strategy, our weekly round-up of sovereign Sukuk, and much more. Our case study covers the US$6 billion IPO from National Commercial Bank, while our inhouse analyses explore the importance of technology and trace the latest developments in South Africa. Our IFN correspondents this week come to you from Nigeria, Turkey, Malta, Pakistan and Azerbaijan; while we also bring you special reports on Sukuk from Farmida Bi of Norton Rose and Shariah compliant contracts from Hussein Kureshi of OCBC. Our country focus this week is Japan with features from Etsuaki Yoshida of JBIC and Tareq Rahman; while Barry Cosgrave of Shearman & Sterling and Abdulbasit Ahmed Al-Shaibei of QIIB discuss current issues in liquidity management. As the markets stir themselves up into a final flurry before the end of the year, we wish all our readers a productive passage into the last month of 2014. Cover Story Coco bonds: Chance or challenge? Sales of contingent convertible (Coco) bonds, a high-risk debt/equity hybrid offering an attractive option for banks to boost Tier 1 capital, have tripled in the conventional market this year as issuers leverage the low interest rate environment to chase higher-yielding debt. LAUREN MCAUGHTRY explores whether these complex new instruments could present a new alternative for the Islamic debt markets, as banks seek new avenues to boost Basel III capital. IFN Reports • IFN Weekly Poll: Inching closer to its proposed issue date and after a postponement in September, will Pakistan meet its target to raise US$1 billion in Sukuk before December 2014? • IFN Eurekahedge round up: Variance in annualized standard deviation • The missing link: Could Islamic repos finally become a reality? • Company Focus: CastleHill Capital Partners • New player on the Takaful scene • IFN Global Trendswatch • Sovereign Sukuk: Busy markets • Indonesia’s five-year roadmap to accelerate its Islamic industry • Sukuk pipeline starts flowing as the end of the year approaches • Stable in the charts: Amana Growth Fund • Turkey’s maiden 10-year Sukuk paves way for longer-term sovereign Islamic debt • Increased growth rates for UAE banks in the first nine months of 2014 • State Bank of India to launch Shariah compliant mutual fund • UK’s largest private rented residential portfolios with a Shariah compliant touch IFN Country Correspondents • IBA and IDB – spearheading Islamic finance in Azerbaijan • Bank Asya to vote on capital increase • NSE listing of Shariah compliant fund to boost Islamic finance industry in Nigeria • Winding up of First Habib Bank Modaraba • Islamic finance in Malta may be given a boost IFN Country Analysis • Islamic finance in South Africa: Sukuk takes the stage IFN Sector Analysis • Technology: A stepping stone to get ahead Shariah Pronouncement An Islamic bank has been using an Istisnah and parallel Istisnah structure to finance the construction of residential as well as commercial buildings Case Study Biggest IPO in the Arab world: National Commercial Bank Making headlines earlier this month, Saudi Arabia’s National Commercial Bank (NCB), the kingdom’s largest financial institution successfully floated its US$6 billion initial public offering (IPO) on the Tadawul. Speaking to Harj Rai and Andrew Tarbuck, partners at Latham & Watkins and legal advisors for the IPO, NABILAH ANNUAR takes a closer look at this historical deal Special Reports Sukuk milestones continue After the flurry of activity over the past few months that saw debut sovereign issuances from the UK, Hong Kong, South Africa and Luxembourg as well as a debut Sukuk from Goldman Sachs, the market has continued to produce landmark results worldwide. FARMIDA BI reviews the sector. Three-sale contracts In the latest of our series exploring specific Shariah compliant contracts and structures, HUSSEIN KURESHI and MOHSIN HAYAT give us their opinion on the concept of three-party sale concepts. After having read ‘Heaven’s Banker’s’ by Harris Irfan, the concept of ‘contractum trinius’ ran shivers down my spine. Features The second wave of Islamic finance in Japan Japan has been slow to recognize or encourage the development of a domestic Islamic finance industry, with Japanese banks required to enter the sector through subsidiaries based in international markets. Outlook on Japan and Islamic finance With Japan hosting the Olympic Games in 2020, the country is taking new measures to make it a more foreigner-friendly nation since it will be hosting the Olympics Games in 2020 which will attract tourists into the nation. TAREQ RAHMAN asks what this implies for Islamic finance? The games presents busines opportunities for Japan to cater to the very much untapped Muslim market. Liquidity management in Islamic finance: Opportunities and challenges As global growth returns and with the Sukuk market re-establishing itself, focus has returned to the problem presented by the dearth of liquidity management tools available to Islamic investors. BARRY COSGRAVE discusses. Liquidity and secondary markets One of the most commonly used secondary market options for liquidity purposes are treasury bills, which central banks globally use for draining liquidity while financial institutions participating in the global markets also use them as part of their liquidity management strategy.  CONTACTS Editorial: Sasikala Thiagaraja Direct Line: +603 2163 7800 ext 34 Finance: Faizah Hassan Direct Line: +603 2162 7800 ext 26 Sales: Dubai: Geraldine Chan Direct Line: +971 4 427 3628 Kuala Lumpur: Steve Stubbs Direct Line: +603 2162 7800 ext 55 Subscriptions: Dubai: Mithun Gangolli Direct Line: +971 4 427 3638 Kuala Lumpur: Siti Amilia Amir Amzah Direct Line: +603 2162 7800 ext 27