Tuesday, September 30, 2014

Omani SME sector receives boost as Meethaq inks Shariah compliant deal with Zubair SEC

Islamic Finance news Alert

Tuesday, 30th September 2014

S&P 500 Shariah
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OMAN: Bank Muscat’s Islamic banking window, Meethaq, has signed an MoU with Zubair Small Enterprises Center (Zubair SEC), under which both parties will collaborate to lend support to entrepreneurs and small business owners while maximizing successful entrepreneurial platforms in the sultanate. This partnership is indeed timely, as SME sectors in many Islamic markets are faced with funding pressures due to the lack of Shariah compliant financial products.

Compared to its regional peers, Oman is reportedly home to one of the least developed SME sectors with such enterprises making up around 16% of the country’s GDP according to industry figures. In Egypt SMEs contribute up to 80% of GDP; in Lebanon 99% and Pakistan, Morocco and Tunisia at between 30-50%, reported the International Finance Corporation (IFC). IFC in its latest SME study (see IFN Report Vol.11 Issue 27) noted that only 36% of the 160 banks surveyed offered SME-focused products, while only 31% had a Shariah compliant SME option. Recognizing this disparity, the Omani sultanate has assumed a more proactive stance towards developing the SME segment; while banks have taken notice of this unfulfilled segment of immense potential, including Bank Muscat which recently launched a training academy specifically for entrepreneurs to aid the development of the nation’s SME sector.

“The main objective of the bank's SME strategy is to complement government efforts in empowering entrepreneurs to chart successful business ventures by providing necessary training, guidelines, tools etc,” explained Sulaiman Al Harthy, Bank Muscat’s Islamic banking group general manager. “The partnership with Zubair SEC marks a clear progression of the well-defined strategy pursued by the bank in line with the directives of Sultan Qaboos bin Said to support the SME sector and strengthen its role in the economic development of Oman."

Elaborating further on the collaboration Mohammed Al Hasani, the chief communications officer of Zubair Corporation, said: “This facility has been evolving and developing based on the close attentiveness to the needs of Zubair SEC's members and the market demand. What we always aim for is to cater to entrepreneurs' needs with all our capacity and reach. Hence, the partnership with Meethaq Islamic Bank has been very well-received by our members and brings a new perspective to the ‘access-to finance’ that we try to facilitate for them through our network of strategic partners."

Through the MoU financial assistance will be extended to local micro and small enterprises based on the funding criteria set by Meethaq; members of Zubair SEC’s Direct Support Program will also be included in the pool of potential financing receivers. In addition to their SME initiative, Meethaq and Zubair SEC will also join efforts in raising awareness on Islamic finance, entrepreneurship and business administration.

Morocco: An IFN Correspondent Report

The opinion of the Economic, Social and Environmental Council on the Islamic Banking Bill
The House of Councilors recently submitted the Islamic Banking Project Law to the Economic, Social and Environmental Council in order to assess it and issue adequate recommendations before the final vote. The Economic, Social and Environmental Council of Morroco held on the 28th August 2014 has its 41st session, chaired by Dr Nizar Baraka, in order to issue an opinion on the Draft Law No. 103.12 related to credit institutions and which also governs the Islamic banking sector.
Data Round-up

IFN Eurekahedge Islamic Fund Index round-up
The top 10 fund data from Eurekahedge this week encompasses three-month returns for globally investing Islamic funds and Islamic equity funds as well as August monthly returns for Middle East and Africa and Asia Pacific funds. REBECCA SIMMONDS casts an eye over the movement in each category.

Today's IFN Alerts

LUXEMBOURG: Luxembourg expected to price debut EUR200 million (US$253.7 million) Sukuk today

TURKEY: Turkey to issue TRY1.84 billion (US$809.08 million) Sukuk on the 1st October 2014

UAE: IDB's US$1.5 billion Sukuk listed on NASDAQ Dubai under the bank's US$10 billion trust certificate program

SAUDI ARABIA: Sedco Capital looks to enhance asset management capabilities, launches first in-house managed Shariah compliant fund

UAE: Amlak Finance shareholders agree debt restructuring using a convertible Shariah compliant instrument worth up to AED2.1 billion (US$571.68 million)

MALAYSIA: Abu Dhabi government expresses concern regarding Employees' Provident Fund's right to vote in Malaysian Islamic mega bank merger

MOROCCO: BMCE Bank reports 51% rise in profit for the first half of the year, amid plans for launch of Islamic banking subsidiary

OMAN: Central Bank of Oman to select five members of the country's national Shariah Supervisory Authority

SAUDI ARABIA: Weqaya Takaful Insurance and Reinsurance to appoint new board members at October extraordinary meeting

MALAYSIA: Rating of FEC Cables' RM130 million (US$40 million) Sukuk reaffirmed at 'A2(s)/Stable' by RAM based on support from majority shareholder Permodalan Nasional

MALAYSIA: RAM withdraws rating of Syarikat Borcos Shipping's fully redeemed RM160 million (US$49.22 million) Sukuk Ijarah program

KUWAIT: Regional managing partner for DLA Piper in Kuwait resigns

REDmoney events

IFN Sri Lanka Forum 2014
21st October 2014 (Colombo)

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 Global Forum 2015
13th-14th September 2015 (Dubai)

REDmoney training

Basel III for Financial Institutions
13th - 15th October 2014 (Kuala Lumpur)

Shariah Audit for Islamic Business Banking
13th - 15th October 2014 (Kuala Lumpur)

Structuring Islamic Legal Documentation
14th - 15th October 2014 (Kuala Lumpur)

Shariah Governance, Corporate Governance and IFSA 2013
15th - 16th October 2014 (Kuala Lumpur)

Funds Transfer Pricing
19th - 21st October 2014 (Manama)

Stress-testing for Banks and Financial Institutions
28th - 29th October 2014 (Kuala Lumpur)

Derivatives & Options Masterclass
2nd - 4th November 2014 (Dubai)

Asset and 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)

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)

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

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

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

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

RHB | Thailand | Exports Fell Deeper In August, Economic Recovery Remains Slow

Economic Research
30 Sept 2014

Economic Highlights

Thailand’s customs merchandise exports fell by a larger magnitude of 7.4% y-o-y in August, compared with -0.9% in July and after a brief rebound to +3.9% in June. This was the fifth month of decline in six months, suggesting that the Kingdom’s exports remained sluggish despite a more stable political situation following the coup in May.

Economist:  Peck Boon Soon  | +603 9280 2163

Maybank GM Daily - 30 Sep 2014



*      Even after the strong US consumer spending and disposable income prints for Aug, US equity markets were in the red, dragged lower by losses in global equities amid geopolitical concerns. The student protests in Hong Kong, which led Asian markets lower yesterday, added to these geopolitical uncertainties. Both the DJIA   and S&P 500 fell by 0.25%, while the NASDAQ dipped 0.14%. The DXY index was choppy as a result but nevertheless continued its upswing above the 85.600-level. USTs offered with the benchmark 10Y yield hovering around the 2.477%-level in the Asian morning.
*      The NZD, which had taken a hit yesterday after the “Goldilocks” comments by the PM, continued on its downslide. The “65-cents” comments together with the alleged RBNZ sale of kiwis yesterday continue to drag the NZD/USD lower with the pair seen around 0.7750 this morning. Today the markets will be watching closely the HSBC PMI-mfg out of China (Flash: 50.5) on Tue.
*      Dollar strength should keep USD/Asian buoyant today, aided in part by some equity-related outflows. Beyond Asia, it is relatively quiet day in terms of data releases with US Chicago Purchasing Manager and Consumer Confidence out tonight.

G7 Currencies

*       DXY – Still Buoyant. After a temporary retreat overnight, dollar bulls were back in action this morning, sending the DXY index back higher to 85.641 this morning. Dollar upticks continue to be underpinned by quarter-end flows as well as flight to safety. Market focus remains on the NFP and expectations of a stronger data print should keep dips supported. Support today is seen around 85.091 while hurdle is around 85.854.
*       USD/JPYSideways Still. Lower global equities and UST 10Y yields are weighing on the USD/JPY. Pair is currently sighted around 109.45 with much of its bullish momentum having dissipated. The break hit a high of 109.75 yesterday but was not sustained and is now the barrier to cross on its way to the 110-barrier. With the few directional cues for now, sideway gyrations continue to be likely ahead. Support is seen around 109.08 today.
*       AUD/USDRangy. AUD/USD appears to be in consolidation currently hovering within a tight range of 0.8684-0.8770 with the pair last seen at 0.8710. Intraday MACD is also showing little momentum in either direction currently. The pair is likely to remain in a holding pattern ahead of the RBA annual report on tomorrow and US NFP on Fri. Until then, look for the pair to remain in sideway gyration within the current trading range of 0.8684-0.8770.
*       EUR/USD – Lacking Momentum. The EUR/USD continues to trade below the 1.27-figure this morning after hitting an intraday high of 1.2715 yesterday. Pair is currently sighted around 1.2688 with our intraday charts still showing little directional momentum. Weak data out of the eurozone yesterday, including consumer and industrial sentiments, weighed on the pair. Ahead of the ECB on Thu, we expect the pair to trade in a tight range within 1.2626-1.2715, though the risks remain on the downside.
*       EUR/SGD – Range-Bound. The EUR/SGD is currently in a holding pattern within 1.6087-1.6213 since last week with the cross last sighted around 1.6160. With directional cues still lacking, and the pair expected to take its cues from both the ECB policy meeting and US NFP later this week, we look range-bound trades ahead within the familiar ranges of 1.6087 and 1.6213 today.

Regional FX

*       The SGD NEER trades 0.47% above the implied mid-point of 1.2792. The top end is estimated at 1.2538 and the floor at 1.3047.
*       USD/SGD – Wobbling. USD/SGD is wobbling this morning, sighted currently around 1.2738 with most of its bullish momentum lost. Still with dollar on a firmer footing, dips are likely to be shallow and should be limited by support at the 1.27-figure today. Any rebound today is likely to meet resistance at 1.2780.
*       AUD/SGD – Downticks. The AUD/SGD closed below our 1.1094-support level yesterday but has since rebounded back above this morning. Still, a bearish AUD and relative strength of the SGD today should continue to weigh on the cross with the next target still seen around 1.098 today. Any unexpected bounces could meet resistance around 1.1216 today.  SGD/MYR – Two-Way Trades. A rebound in the MYR this morning is weighing on the SGD/MYR with the cross sighted around 2.5698. Support is seen around 2.5633 (38.2% Fibo retracement of the Jan-Aug downswing) today while the barrier is around 2.5734. Intraday charts continue to show little momentum in either direction, suggesting two-way moves are likely today.
*       USD/MYR – Retreating. USD/MYR took out our barrier at 3.2717 on its way up yesterday. Pair remains above the 3.2717-barrier but is on the slight retreat this morning, hovering around 3.2747. With the uptrend still intact, the next target in sight for bulls is 3.2960. Dips though should be shallow with support seen around 3.2492 still. 
*       USD/CNY was fixed at 6.1525 (-0.0014), vs. previous 6.1539 (+2.0% upper band limit: 6.2781; -2.0% lower band limit: 6.0319). CNY/MYR was fixed at 0.5298 (-0.00210). USD/CNY – Sliding-Within-Range. After yesterday’s jump towards our 6.1570-barrier, the USD/CNY is on the slide this morning, hovering around 6.1509. A weaker-than-expected flash HSBC PMI manufacturing print and a lower fixing today is weighing on the pair. 6.1292 continues to be supportive today, though a break here exposes the next support at 6.1206.  6.1570 should continue to cap upside today. Flash estimates for the HSBC PMI manufacturing remained in expansion mode, coming in at 50.2 in Sep (Aug: 50.5), though this was below market expectations of 50.5.
*       1-Year CNY NDFs – Downside Bias. The NDF jumped above the 6.27-figure yesterday but is on the slide this morning following the disappointing flash HSBC manufacturing PMI print. The NDF is currently sighted back below the 6.27-figure around 6.2679 with bullish momentum on the wane. For bulls to retake control, we need to see the 6.2745-hurdle (yesterday’s high) taken out. Support is seen around 6.2595 today. USD/CNH – Downticks. USD/CNH is tracking the NDF lower after taking out a couple of our barriers on its way up yesterday. Pair is currently sighted around 6.1717 with intraday MACD showing bullish momentum, though it is waning slightly. Pressured lower this morning, new support is seen around 6.16-figure today, while topside is likely to be capped around 6.1803 (yesterday’s high).
*       USD/IDR – Upside Risks. The USD/IDR continues on its uptick, edging closer to our barrier at 12280. Pair is currently sighted around 12208 with our intraday momentum indicators showing bullish momentum still, though the pair is currently overstretched. Concerns that the president-elect might not be able mobilize support within a hostile incoming parliament to push through necessary but unpopular reforms are lifting the pair higher. Other concerns, including dollar strength as well as the twin deficits, are also weighing on the IDR. Recent flows data showed that foreign funds continuing to sell off a net USD44.79mn in equities yesterday but have added a net IDR3.31tn to their outstanding holding of debts as of 26 Sep. With risks still to the upside, immediate barrier is seen around 12280 with a break exposing the next at 12350. 12100 should be supportive today. The 1-month NDF hit a new high of 12420 yesterday but has since come off to hover around 12379 at last sight. Intraday MACD continues to show bullish momentum, though the NDF has exited overstretched conditions. The JISDOR was again fixed above the 12000-figure, set at 12120 on Mon – a high not seen since 11 Feb.
*       USD/PHPBearish Bias. USD/PHP is on the retreat this morning on the back of a softer dollar tone, hovering around 44.911. Pair though remains within striking distance of the 45.000-figure should the dollar resurges. Barrier to cross remains at 45.050. Dips though should be shallow given expectations of dollar strength with support still seen around 44.700 today. The 1-month NDF is edging lower this morning, hovering around 45.010 with the NDF losing most of its bullish momentum.
*       USD/THB – Downward Tilt. USD/THB is on the slide this morning but remains within its current trading range of 32.355-32.500. Pair is sighted around 32.372, dragged lower by a softer dollar tone. Any dips though should be shallow given expectations of a dollar resurgence. Support nearby is seen around 32.355 before 32.290 today. Topside continues to be capped by 32.500. Deteriorating risks sentiments yesterday saw foreign funds selling a net THB1.75bn and THB3.20bn in equities and debt, lifting the pair higher. Customs trade disappointed yesterday with exports and imports both contracting by 7.4% and 14.17% y/y respectively in Aug, extending their losses from Jul’s -0.85% and -2.86%. The trade balance returned to a surplus of USD1146mn in Aug vs. Jul’s USD1102mn.



*      Local government bonds mostly traded range-bound with buyers seen at the long-end of the curve on 30y MGS 9/43. We saw foreign name buying 10y MGS 7/24 this afternoon as the bond dipped 1bp from yesterday. The 5y GII 4/19 reopening auction drew a healthy bit-to-cover (BTC) ratio came of 2.359x, which caught the market by surprise as many had underestimated the level of onshore liquidity. The bond yield gapped lower post-auction with last done at 3.79%.
*      IRS market had an uneventful day. 5y IRS trades hovered at about 3.98% again and 4y IRS traded at 3.90%. 3M KLIBOR was steady at 3.73%.
*      The local PDS market opened on a quiet note today. Interest seemed to be skewed to the selling side. We believe most trades today were for asset reallocation of real money due to month-end closing. Levels continued to be tight and we prefer to be sidelined at the current level and liquidity.


*      The SGD IRS curve bear flattened, tracking the lacklustre trading in the USD curve. The SGD IRS curve ended about 3-5bps higher at the front end and up 1-2bps at the long end. Despite the flattening IRS curve, long-dated SGS continued to underperform short-dated papers. Persistent offers at the long end kept SGS swap spreads beyond the 10y point at recent lows.
*       The Asian credit market saw a sell-off in the morning on headlines of Bill Gross leaving Pimco. The sell-off was further exacerbated by Occupy Central that is paralyzing HK city center. China state-owned enterprises (SOE) traded almost 5-7bps wider. Broad based selling was seen across Indonesian names as well. RHB opened book for a senior 5y USD paper with the last guidance level shown at CT5 + 135 +/- 5bps. The level seems fair in comparison with AMMMK 2019 that is trading around +130 level.

*      DMO sets the eleventh Indonesia retail bond coupon at 8.50%. In our view, the consideration of keeping the coupon unchanged compared to ORI010 might be based on future expectation of cost push inflation due to subsidize fuel price hike discussion. Even at coupon of 8.50%, we consider ORI011 remains attractive as current 3 years government bond is running at a yield of approx 7.800% (as of Sep 29).
*      Indonesia parliament sets 2015 budget deficit at 2.21% of GDP. Assumption set in the final 2015 budget are as follows Economy growth: 5.80%, yearly inflation: 4.40%, average USDIDR: Rp11,900 per USD, average oil price: US$105 per barrel, oil lifting: 900,000 barrel per day, gas lifting: 1,248,000 boepd, 3-mo government treasury bills coupon at 6%.
*      Indonesia bond market closed lower in line with Rupiah depreciation. In our view, the losses occurred as investors would demand higher average weighted yield during the auction today. Moreover, improving US economy data have given a negative impact to the bond market as it raises the concern of how fast would Fed increase their FFR. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 8.183% (+11.5bps), 8.399% (+18.7bps), 8.797% (+19.5bps) and 8.982% (+19.6bps) while 2-yr yield shifts up to 7.603% (+3.4bps). Government bond traded heavy at secondary market amounting Rp10,156 bn from Rp8,788 tn with FR0070 (10-yr benchmark series) as the most tradable bond. FR0070 total trading volume amounted Rp2,702 bn with 118x transaction frequency and closed at 99.836 yielding 8.399%.
*      DMO will conduct its final auction in 3Q 14 today with five series to be auctioned which are SPN03150103 (Coupon: discounted; Maturity: 3 Jan 2015), SPN12151001 (Coupon: discounted; Maturity: 1 Oct 2015), FR0069 (Coupon: 7.875%; Maturity: 15 Apr 2019), FR0071 (Coupon: 9.000%; Maturity: 15 Mar 2029) and FR0068 (Coupon: 8.375%; Maturity: 15 Mar 2034). We do believe that the auction will be oversubscribe by 1.5x – 2.5x from its indicative target issuance while our view on the indicative yield are as follows SPN03150103 (range: 6.550% – 6.670%), SPN12151001 (range: 6.980% – 7.100%), FR0069 (range: 8.120% – 8.250%), FR0071 (range: 8.720% – 8.820%) and FR0068 (range: 8.870% – 9.000%).
*      Corporate bond traded thin amounting Rp326 bn (vs average per day (Jan – Aug) trading volume of Rp657 bn). AMRT01CN1 (Shelf registration I Sumber Alfaria Trijaya Phase I Year 2014; Rating: AA-(idn)) was the top actively traded corporate bond with total trading volume amounted Rp88 bn yielding 10.500%.

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