MALAYSIA: MARC proposes new rating methodology for rating investment managers; will finalize draft following market feedback

Tuesday, 28th July 2015

S&P 500 Shariah Dow Jones Islamic World FTSE Shariah All World Russell - IdealRatings Islamic Global 1,795.92 2,874.58 1,986.39 1,876.17 ▼ -19.29 (-0.96%)

HIGHLIGHTS: German bank extends Islamic financing facility to SEDCO Capital – New CEOs at Standard Chartered Saadiq and Qatar First Bank – MARC proposes new rating methodology for investment management activities

This week's poll question: What is the most cost effective way to increase Islamic retail banking customers?

Hunt for yield and longer-term Sukuk persists Daily Cover GLOBAL: The weaker grade Sukuk market is showing no signs of abatement as higher-yield Islamic bond indexes continue to outperform indexes of their better-rated counterparts. Year-to-date, the Dow Jones Sukuk Index outshone the Dow Jones Sukuk Higher Quality Investment Grade Total Return Index, registering a 1.42% increase as of the 30th June 2015. This hunt-for-yield theme is an extension of an 18-month trend which has seen the Dow Jones Sukuk ‘BBB’-Rated Total Return Index and Dow Jones Sukuk ‘AA’-Rated Total Return Index surging 10.5% respectively. “Investor appetite for Sukuk remains, and there is a tendency to favor higher-yielding and longer-tenor Sukuk,” noted S&P in its latest fixed income report. Data from the rating agency shows that while a majority (58%) of the Sukuk market is dominated by short-term papers (less than five years maturity), longer-tenor facilities are gaining momentum with 10 and 30 years gaining popularity among issuers and investors, as explored earlier by IFN (See IFN Report Vol 12 Issue 25: ‘Long-term Sukuk the new flavor’). The Dow Jones Sukuk 7-10 Year Total Return Index has consistently outstripped the shorter-tenor indexes since the 31st December 2013. “There are some perpetual Sukuk issued in the market; while issuers aim to diversify their funding sources and expand their market shares, some issuers particularly try to utilize the additional Tier 1 capital to satisfy the Basel III requirement,” added S&P. For the first six months of the year, total global Sukuk issuance (as tracked by the Dow Jones Sukuk Index) was up 28% year-on-year at US$7.75 billion, with the GCC commanding 53% of the market share (out of which the UAE leads at 26%), followed by Indonesia at 13% and Malaysia and Turkey at 10% respectively. “The Sukuk market continues to show positive signs of development, including growing market share and expanding issuer profiles,” opined S&P. “Further growth may be driven by a wider investor base and supportive policies from regulators of Islamic finance.” Malaysia: An IFN Correspondent Report Malaysian Sukuk outperform despite weakening currency Locally issued ringgit Sukuk are outperforming despite the currency continuously plunging and weakening to its lowest spot in 15 years due to uncertainties in the local economy. For the Islamic bill that is due in 2016 and 2017, the sovereign-backed ringgit Sukuk yielded 2.5% and 3.5% respectively for this year as compared to dollar-denominated Sukuk which yielded 0.8% and 1.7% respectively in the same year. Its premium has increased more than 200bps when compared to other Sukuk issued globally. Today's IFN Alerts GERMANY: German specialist bank provides Shariah compliant refinancing facility to SEDCO Capital for Berlin real estate portfolio SOUTH AFRICA: South African taxation legislation to cover listed companies effective 2016 MALAYSIA: MARC proposes new rating methodology for rating investment managers; will finalize draft following market feedback UAE: Abdulla Al Awar to deliver keynote address at the IFN Issuers Forum in Dubai this September UAE: First Gulf Bank records net profit of AED2.87 billion (US$781.27 million) in the six-month period ending June 2015, a 7% upturn year-on-year UAE: Dubai Financial Market’s first half earnings plunge 57% as trading value tumbles QATAR: Qatar’s sovereign outlook remains stable; ratings at ‘AA-‘ and ‘A1+’ GLOBAL: Sohail Akbar to head Standard Chartered Saadiq MALAYSIA: Swiss Re appoints Randy Hong to lead Kuala Lumpur operations QATAR: Qatar First Bank names Istithmar World chief as CEO as the bank seeks to expand private equity and private banking business TURKEY: Turkiye Finans shows full support for IFN Turkey Forum 2015 as lead partner GLOBAL: IFN Asia Forum breaks 1,000-delegate mark yet again – dates for next year confirmed SAUDI ARABIA: Islamic Corporation for the Development of the Private Sector chief to deliver keynote address at the IFN Saudi Arabia Forum MALAYSIA: Industry leaders address Islamic finance investment opportunities at IFN Asia Investors Day Forum 2015 SAUDI ARABIA: Saudi British Bank supports IFN Saudi Forum 2015 as lead partner

IFN Issuers Forum 2015 13th September 2015 (Dubai) Africa Islamic Finance Forum 2015 17th & 18th September 2015 (Abidjan, Cote d’Ivoire) IFN Kuwait Forum 2015 19th October 2015 (Kuwait City) IFN Turkey Forum 2015 17th November 2015 (Istanbul) IFN Saudi Arabia Forum 2015 30th November 2015 (Jeddah) Understanding Islamic Contracts: Structuring & Legal Issues 17th - 19th August 2015 (Dubai) Islamic Financial Services Act (IFSA) 2013 & Islamic Banking Products 18th & 25th August 2015 (Kuala Lumpur) Shariah Audit & Governance for Islamic Banking 20th - 21st August 2015 (Kuala Lumpur) Islamic Finance Qualification 23rd - 25th August 2015 (Dubai) Advanced Sukuk & Islamic Securitization 24th - 26th August 2015 (Istanbul) Undertaking Effective Litigation & Recovery in Islamic Finance Facilities 7th - 8th September 2015 (Kuala Lumpur) Sharia’a Compliance & Audit for Islamic Banks 8th - 9th September 2015 (Dubai) Funds Transfer Pricing 5th - 7th October 2015 (Kuala Lumpur) Trading Book Market Risk Management for Financial Institutions 8th - 9th October 2015 (Kuala Lumpur)