Friday 1st August 2014
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FRIDAY TICKER: AUGUST 1ST: Collaborative Data Network CMDportal statistics show that the international money market increased outstandings by approximately $31bn during the month of July, both in USD and in EUR, with three of the four major asset classes posting growth. Financial Institutions Groups (FIGs) outstandings increased by 3.44%, seeing the greatest absolute growth. Sovereigns, Supranationals and Agencies (SSAs) posted a 2.9% increase. Oustandings by Corporate borrowers grew by 7%. The only major sector that posted a contraction was Asset-Backed securities, which finished down by approximately $1.4bn (3.2%). USD denominated markets grew by USD13.2bn and Euro denominated markets grew by $12.5bn equivalent. Total International Money Market settlements in July reached $307.8bn - Moody's Interfax Rating Agency has today affirmed the Baa3.ru national scale rating (NSR) of Maritime Bank. The affirmation of the NSR reflects Maritime Bank's currently acceptable capital adequacy and asset quality balanced with weak profitability; and modest liquidity cushion against the bank's high depositor concentration and the challenging operating environment in Russia. NSRs carry no specific outlooks. The rating action is primarily based on the bank's unaudited financial statements for January 2013-July 2014 - The Macau government published the casino industry’s gross gaming revenue today. In July, Macau collected 28.4 gross gaming revenue, or an equivalent of 917 million daily table wins, down 3.6% from a year ago. Macau’s July numbers were clouded by the World Cup, say the government. Chinese are avid soccer fans. Macau names fell off in trading after the announcement, with Galaxy Entertainment losing 2.4%, while Wynn Resorts fell 1.8%. All eyes are now on August’s figures - A new point-of-sale malware known as Backoff has been linked to numerous remote-access attacks, putting small merchants at greatest risk, according to an alert from federal authorities. The alert from the Department of Homeland Security, the Secret Service and the Financial Services Information Sharing and Analysis Center notes that Backoff is a recently discovered family of POS malware that has now been identified in at least three separate forensic investigations – Italy’s biggest retail bank Intesa Sanpaolo has beaten forecasts reporting a Q2 net profit of €217m, as the bank moves along a new business path which highlights asset management. The bank said its operating result and pre-tax profit for the period was the best in the last nine quarters, with higher revenues from asset management offsetting the impact of one-off charges such as write-downs.

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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