Monday 27th April 2015
NEWS TICKER: MONDAY, APRIL 27th 2015:Luc Luyet, CIIA – Senior Market Analyst AT Swissquote says that yesterday, “the SNB surprised the market by announcing that the number of sight deposit account holders that are exempt from negative interest has been reduced. This decision doesn’t change much the domestic banks’ situation as the “20 times the minimum reserve requirement” rule is still running. On the other side, the institutions associated with the Confederation, such as the pension fund of the Confederation or the pension fund of the SNB, are no longer exempt of negative interest. Consequently, only the account holders of the national social security system are still fully exempt.” - High yield debt issuance remains buoyant. Issuance volume for the week ending April 17, 2015, slowed down a bit from the previous week, but remained strong. Junk bond, or high-yield debt, issuers continued to issue bonds as yields remained favourable. High-yield debt is tracked by the SPDR Barclays Capital High Yield Bond ETF and the iShares iBoxx $ High Yield Corporate Bond Fund. According to data from S&P Capital IQ/LCD, dollar-denominated bonds amounting to $10.75bn were issued across 16 transactions in the week ending April 17th. The issuance volume fell by 3.2% from the week ending April 10. Pricing was evenly spread across the week. The number of transactions fell from 18 to 16 week-over-week. Last week brought the total US dollar issuance of high-yield debt to $115.8bn in 2015 YTD, up some 15% from the same period in 2014, the bulk of which is refinancing of older debt - Moody's says EMEA auto ABS performance remained stable during the three-month period ending February 2015. The sector's average performance trend was positive in terms of delinquency ratios and cumulative losses. The 60+ day delinquencies decreased to 0.66% in February 2015 from 0.77% in February 2014, while cumulative defaults decreased to 1.06% from 1.20% over the same period. This decrease was due mainly to the good performance of the German and Dutch markets. The prepayment rate increased slightly to 13.49% in February 2015 from 13.30% a year earlier. As of February 2015, the pool balance of all outstanding rated auto ABS transactions was €27.55bn - According to Sino specialists Red Pulse, China’s State Council is considering allowing daily repatriation for QFII. Currently, RQFII enjoys T+1 repatriation while QFII is restricted to T+5. QFII is the largest channel for foreign investment into China with quota of USD150bn, however, only half of the quota is in use, like at least partly due to the five-day repatriation stipulation - Malaysia’s state pension fund will offer a Shari’a-compliant investment option for its members by 2017, Prime Minister Datuk Seri Najib Razak said today. Najib says it will create the largest Shari’a fund of its kind in the world. Malaysia has one of the world’s largest Islamic finance sectors and the authorities are keen to develop it further. They envision the industry accounting for 40% of the country’s total banking assets by 2020 compared with latest figures of around 23% released last year. The $160bn (MYR577.4bn) Employees Provident Fund (EPF) already invests about a third of its portfolio in stocks and bonds that comply with Islamic principles, which ban interest payments and pure monetary speculation. The fund reportedly hired consultants last year to study the feasibility of a state-backed pension fund focusing entirely on Shari’a-compliant investments. Additionally, local press reports says that Malaysia’s sovereign wealth fund Khazanah Nasional has received regulatory approval to issue a MYR1billion (around $275m) socially responsible Islamic bond - The NASDAQ OMX Group, Inc has declared a regular quarterly dividend of $0.25 per share on the company's outstanding common stock, an increase of 67% from the prior $0.15 per share quarterly dividend. The dividend is payable on June 26TH 2015, to shareowners of record at the close of business on June 12TH 2015 - Lazard Ltd today reported operating revenue1 of $581m for the quarter ended March 31st. Adjusted net income was $103m, or $0.77 (diluted) per share for the quarter. These results exclude a pre-tax charge of $63m relating to a debt refinancing2. Q1 2015 net income on a U.S. GAAP basis, including the pre-tax charge, was $56m, or $0.42 (diluted) per share. "Our Financial Advisory and Asset Management businesses continue their strong performance," says Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "In the first quarter, we refinanced and repaid a portion of Lazard's long-term debt, significantly reducing our interest costs," adds Matthieu Bucaille, chief financial officer of Lazard. "Consistent with our capital management objectives, we have increased the quarterly dividend by 17%, the fifth increase in as many years." -

Malaysia offers tax breaks to secure dominance of sukuk issues

Wednesday, 23 May 2012
Malaysia offers tax breaks to secure dominance of sukuk issues Malaysia is offering tax breaks to issuers in an effort to secure its global dominance of Islamic finance. It seems to be working, there appears to be a record rally in foreign-currency sukuk. Moreover, arrangers say interest is increasing among local corporate issuers; with Standard Chartered claiming a growing issuance pipeline worth $1bn, most of which will be in foreign currency denominated bonds. http://www.ftseglobalmarkets.com/

Malaysia is offering tax breaks to issuers in an effort to secure its global dominance of Islamic finance. It seems to be working, there appears to be a record rally in foreign-currency sukuk. Moreover, arrangers say interest is increasing among local corporate issuers; with Standard Chartered claiming a growing issuance pipeline worth $1bn, most of which will be in foreign currency denominated bonds.

Malaysia is seeking to strengthen its lead over the Gulf Cooperation Council countries as a centre of Islamic finance. It hopes to become a capital markets issuance hub, and in an effort to secure its place in the pantheon of issuing markets has announced that it is exempting investors from capital gains taxes on non-ringgit sukuk between now and the end of 2014. It is a smart move, given that more Asian companies see sukuk denominated in currencies other than the ringgit as an effective funding strategy. Malaysia has become the world’s leading sukuk market, accounting for some 73% of the $92bn of sukuk issued globally last year; a banner year in which issuance volume rose by 68% on 2011. Malaysia is also the domicile for 68% of the $210bn total sukuk outstanding globally as at end-2011, according to recent figures issued by the Securities Commission in Malaysia.

Nonetheless, there is some way to go and sales of foreign currency bonds issued out of Malaysia have topped only $358m so far this year, compared with a grand total of $2.1bn for the whole of last year. The signs are that the Malaysian authorities have discounted this year for foreign currency denominated ringgit and have introduced a raft of initiatives in the hope of capitalising on better global market conditions in 2013 and beyond. Ringgit sukuk however continue to outstrip issuance in foreign currency.



Khazanah, the country’s sovereign-wealth fund alone, sold $358m of seven-year bonds convertible into shares at a negative yield in March alone. However, that was pretty much a plain vanilla deal for the issuer, which is rated A3 by Moody’s. Sukuk watchers may remember that the fund issued the first yuan-denominated Shari’a compliant notes in Hong Kong last year.

Corporate sales of ringitt denom­inated sukuk in Malaysia climbed 8% in the first quarter (compared with Q1 2011) to MYR13.4bn, after Tanjung Bin Energy raised MYR3.3bn in March in the biggest offering so far this year. Investor demand is also buoyant. A recent issue by Pembinaan BLT, the state-owned construction company, worth MYR1.35bn was over­subscribed 2.6 times.

Even so, the market infrastructure remains problematic and will likely dampen growth unless Malaysia can unlock key elements. Among them must rank a lack of secondary market liquidity; in particular the lack of secondary market trading. This is a problem of infrastructure and supply as well as a lack of formal trading mechanisms. Without an active secondary market liquidity and sustained fund manager participation in the market is not really feasible.

Once the Kuala Lumpur-based International Islamic Liquidity Management Corporation (IILM) is up and running properly, the resulting intermarket dialogue should spur member states and the central bank executives that represent them in the corporation should help (over the longer term) should help to mitigate this lack of market liquidity. The IILM is supposed to facilitate cross-border liquidity management among institutions offering Islamic financial services by making available a variety of Shari’a-compliant instruments, including sukuk, on commercial terms, to suit the varying liquidity needs of these institutions. The IILM, of which the Saudi Arabian Monetary Agency (SAMA) is a founding member, is due to launch its debut benchmark sukuk within the next two months. Some $3bn of issuance is expected to originate out of the IILM each year.

For now, Malaysia is managing to retain the initiative and remains the most developed systemic Islamic financial market and an active secondary trading market. However, it is not the largest liquidity pool in Islamic finance; that honour goes to Saudi Arabia, which is potentially the largest sukuk origination market; though again, local infrastructure limitations are apparent. Very few sukuk, for instance, are traded on the Tadawul and the market remains firmly domestic.

According to the latest data of the Securities Commission Malaysia, between 2000 and 2010, the First Capital Market Masterplan period, the local Islamic capital market more than tripled in value to MYR1.05trn, growing at an annualised rate of 13.6%. The Second Capital Market Masterplan, or CMP2, which spans the ten-year period to 2020 (please refer to FTSE Global Markets, Issue 57, pages 55 to 60 for more information), expects Malaysia’s Islamic capital market to grow by an average 10.6% a year, to reach just under MYR3bn by 2020, of which sukuk segment will account for 46% of the total.

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