Tuesday 31st March 2015
NEWS TICKER: MONDAY MARCH 30th 2015 : According to LuxCSD several unions in Argentina have called for a strike on tomorrow. It is still not known whether the Central Bank of Argentina, Caja de Valores as Central Depository and/or the Argentine Stock Exchange will adhere to this strike, and of the possible impact on settlement and cash operations. Citi, which is LuxCSD’s custodian, will be keeping the securities depositary updated on developments. LuxCSD says its customers are advised to take into consideration the possibility of disruption and delays in the settlement and cash processes - Capital Intelligence (CI) has affirmed Bahrain's Long-Term Foreign and Local Currency Ratings of 'BBB' and its Short-Term Foreign and Local Currency Ratings of 'A2'. The Outlook for Bahrain's ratings was revised to 'Negative' from 'Stable'.Deterioration in the public finances in view of the country's dependence on declining oil revenues, in addition to continued increase in debt levels. b) Deterioration in current account position in view of the decline in the value of oil exports, which limits the country's shock absorption capacity. Reflecting rising public expenditure and declining international oil prices, the budget deficit is expected to have doubled to 6.8 per cent of GDP in 2014 and is on course to exceed 12 per cent in the coming years, assuming no change in key policies and an average oil price of $50 per barrel in 2015-16. The central government budget structure remains weak in view of the lack of diversification of government revenue (oil accounts for around 88 per cent of central government revenue), and the absence of fiscal consolidation measures in view of the polarised political climate. Spurred by growing deficit, central government debt level continued its increase reaching 47.1 per cent of GDP in 2014, compared to as low as 21.4 per cent of GDP in 2009, while it is expected to top 69.2 per cent of GDP in 2016. Gross financing needs are also expected to increase to a still manageable level of 18.5 per cent of GDP in 2016, compared to 7.5 per cent of GDP in 2013 - French operator Bouygues Telecom says it will roll out one of the first implementations of LoRa low-power WAN technology, designed specifically to support the Internet of Things (IoT) connectivity, in France by June. The underlying technology was developed by French company Cycleo. The purpose of an IoT-specific wireless networking technology is primarily to be as low-power as possible. Many IoT implementations will be industrial, embedded use-cases where replacing power sources is expensive and impractical. Bouygues has been trialling LoRa in Grenoble since 2013 and expects 500 towns and cities to be covered by year end. KPN, Swisscom, Belgacom and Fastnet are also reported to be ready to deploy LoRa networks or carrying out large-scale trials. “The Internet of Things is going to transform entire areas of our economy, says Olivier Roussat, Chairman and CEO of Bouygues Telecom in an official statement - Moody's has today assigned a Baa2 long-term rating to the new hybrid securities issued by Bayer AG. The rating outlook is stable. The rating of Baa2 is two notches below Bayer's A3 senior unsecured rating. This reflects the deeply subordinated ranking of the new hybrid securities in relation to the existing senior unsecured obligations of Bayer or those issued by its subsidiaries and guaranteed by Bayer. The new hybrid securities will be senior to common shares - The Straits Times Index (STI) ended +4.16 points higher or +0.12% to 3454.26, taking the year-to-date performance to +2.65%. The FTSE ST Mid Cap Index gained +0.10% while the FTSE ST Small Cap Index gained +0.03%. The top active stocks were SingTel (-1.13%), UOB (-0.13%), DBS (+0.30%), Global Logistic (+0.76%) and CapitaLand (+1.39%). The outperforming sectors today were represented by the FTSE ST Consumer Goods Index (+0.89%). The two biggest stocks of the FTSE ST Consumer Goods Index are Wilmar International (-0.61%) and Thai Beverage (+3.36%). The underperforming sector was the FTSE ST Telecommunications Index, which declined -1.05% with SingTel’s share price declining -1.13% and StarHub’s share price declining-0.23%. The three most active Exchange Traded Funds (ETFs) by value today were the DBXT S&P/ASX 200 ETF (unchanged), STI ETF (unchanged), DBXT FTSE Vietnam ETF (+1.19%) – The Singapore Exchange (SGX) says that UOB Bullion and Futures Limited (UOBBF) has joined as a trading member of its securities market. Chew Sutat, head of sales and clients, SGX says the membership enables UOBBF to offer “another product class to their regional clients, thus adding to liquidity in the securities market. We also look forward to working with UOBBF to bring their existing derivatives customers to all our markets. As an SGX Securities Trading Member, UOBBF will be able to offer equity trading services to institutional clients, and accredited and expert investors. SGX now has 27 trading members and 26 clearing members - Taking their cue from the positive tone in Wall Street on Friday, major Asian equity markets were firmer today favoured by market expectations for the adoption of further policy stimulus by Chinese authorities to support domestic economic activity. Elsewhere, US Treasuries were modestly firmer in early trade on Monday while the FOMC Chairman’s mildly hawkish remarks assisted the USD to move higher says Eurobank’s mid-morning markets review. According to the bank discussions between Greek authorities and the Brussels Group on a fully-costed list of reforms the Greek side submitted late last week are reportedly expected to continue on Monday for the third consecutive day. Local press reports suggested today that a number of issues still remain open. On the latter, local newswires quoted an unnamed high level euro area official as saying that the Euro Working Group will likely assess Greece’s reform proposals later this week (reportedly on Wednesday) but euro area finance ministers are not expected to convene before all the details are ironed out. Meanwhile, Prime Minister Alexis Tsipras has reportedly requested an extraordinary plenary session to be held today at 8pm Greek time to inform the Hellenic Parliament about the progress of ongoing discussions with the Institutions - Standard & Poor's revised last Friday the outlook on the Republic of Cyprus sovereign credit rating to positive from stable, affirming the country's B+/B long- and short-term foreign and local currency sovereign credit ratings - Nearly two thirds (61%) of small and medium sized companies who are yet to undertake auto enrolment say they would welcome the publication of a definitive list of pension providers that accept all firms - regardless of size - to help them comply with their auto enrolment duties, according to new research* by workplace pensions provider NOW: Pensions. Of the SMEs surveyed who are yet to stage, two thirds (66%) don’t have any existing pension arrangements for their staff while 8% have a stakeholder pension scheme set up but don’t have any members of staff in it. A quarter already offer a scheme to a proportion of their workforce. When it comes to selecting a pension provider for auto enrolment, over a quarter (27%) of those who are yet to stage still say they haven’t given any thought to how they’ll go about finding a pension provider, down from 44% in 2014**. One in ten (12%) are going to search the market and do the research themselves, up from just 4% of those firms surveyed in 2014. When it comes to seeking external advice, over a quarter (26%) intend to get help from their accountant up from 14% in 2014. One in six (16%) intend to rely on their existing provider, down from 22% in 2014. Just 6% plan to speak to a financial adviser up from 5% in 2014. Morten Nilsson, CEO of NOW: Pensions said: “As smaller companies begin to tackle auto enrolment, the number planning on choosing their pension provider without any advice is inevitably going to grow. “This is why The Pensions Regulator’s (TPR) decision earlier this month not to publish a list of pensions schemes that are directly available to any employer, was so disappointing. The reality is these firms urgently need help to find high quality, low cost providers that are willing to accept their business, and the regulator needs to hear their pleas before it is too late.” - Harkand has secured a multi-million pound contract with Maersk Oil North Sea Ltd for the provision of DSV services in the North Sea region. The 12-month contract will be serviced by Harkand’s two DSVs, the Harkand Da Vinci and Harkand Atlantis, supported by project management and engineering from the firm’s Aberdeen office. The contract covers well tie-ins, structure installation, piling, flexible flow line lay, flexible riser installation, pre-commissioning, riser recovery, decommissioning and general inspection, repair and maintenance (IRM) work. Harkand Europe managing director, David Kerr explains, “This contract win is a further acknowledgment, not only of the expertise and capacity we have built up within the region, but also the open culture that we have at Harkand. We look forward to delivering a consistent and cost efficient service to Maersk, which is especially critical in today’s business environment. By utilising both our sister DSVs, we will provide a robust and fully flexible approach to executing both planned and unplanned interventions and we will work closely with Maersk to ensure safe and successful campaigns.” The Harkand DaVinci and Harkand Atlantis are both equipped with state-of-the-art saturation diving systems, 140t active heave compensated cranes and Super Mohawk ROV spreads -Alcatel-Lucent has announced a partnership with China Telecom to roll out the operator’s FDD-LTE services to 40 additional cities across 12 Chinese provinces. The French infrastructure vendor said it is one of three suppliers to have been chosen by the telco, and will provide its LTE mobile ultra-broadband access technology to complete the project.

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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