In IFN’s monthly analysis, LAUREN MCAUGHTRY brings you a comprehensive review of global Islamic markets. April saw sovereigns keep issuing, equity markets flatten out and asset management activity pick up – while the Islamic banking sector also mourned the loss of one of its brightest stars.
April kicked off with the usual multitude of short-term sovereign issuances to manage liquidity, including papers from Malaysia, Gambia, Kuwait, Bangladesh, Brunei and Bahrain. Indonesia announced its intention to issue once more, and Saudi Arabia printed a further tranche of domestic Sukuk, while Morocco published a new securitization law that could spur its own sovereign ambitions. Noor Bank issued a strongly oversubscribed US$500 million Sukuk facility that listed on NASDAQ Dubai, while Sharjah Islamic Bank also issued a US$500 million Sukuk facility.
On the corporate side, Saudi’s Bidaya Home Finance raised SAR250 million (US$66.63 million) via its inaugural Sukuk facility under its SAR500 million (US$133.25 million) Sukuk program. Malaysia’s UEM Edgenta issued a one-year Islamic commercial paper for RM50 million (U$12.76 million), DanaInfra issued a one-year Islamic commercial paper worth RM1 billion (US$255.88 million) and Aeon issued a similar one-year paper for RM100 million (US$25.71 million). Boustead Holding raised RM150 million (US$38.46 million) via the issuance of a three-year Sukuk Murabahah facility, WCT Holdings issued an Islamic medium-term note (IMTN) worth RM310 million (US$79.69 million) with an eight-year tenor, and UMW Holdings issued a 100-year IMTN worth RM1.1 billion (US$282.76 million).
It has been a turbulent month for Islamic banking, with highs and lows across the industry. The mergers and acquisitions trend continues — in Kuwait, the National Bank of Kuwait confirmed it was considering an increase in its 61.25% stake of the Islamic Boubyan Bank, while Bahrain’s Ahli United Group acquired 7.28% of Saudi’s Bank Al Jazira. Bahrain’s GFH signed an agreement with Al Ramz Capital for the latter to act as a market maker for its shares in the Dubai Financial Market, Maybank Islamic is reportedly eyeing up a possible Dubai office for wholesale banking operations, the Central Bank of Kenya authorized Pakistan’s Bank AL Habib to open a representative office in Kenya, Citigroup and Emirates NBD set up shop in Saudi Arabia, and in Malaysia mortgage corporation Cagamas and MBSB Bank signed a new agreement to give MBSB access to Cagamas’s Mortgage Guarantee program.
On the flipside, Al Hilal Bank uncovered a AED500 million (US$136.12 million) internal fraud, and the General Council for Islamic Banks and Financial Institutions warned that its members faced a potential threat due to the global decline of correspondent banking, due to their regional/local positioning, which could suffer from the de-risking process currently being undertaken by some international banks.
Finally, it is with great and sincere sadness that the industry learned of the passing of the highly respected and much-admired Tirad Mahmoud, the legendary former CEO of Abu Dhabi Islamic Bank. Instrumental in the growth of the bank and manning the helm since 2008, Tirad retired in March 2017 due to ill health.
The equity markets have remained largely static. The S&P Global BMI Shariah flatlined at 0.64%, slightly underperforming the conventional index which returned 1.03%. The S&P Pan Asia Shariah was down slightly at -1.09% over the month, while the Pan Africa Shariah Index fell further at -2.07%. The Middle East, in comparison, performed relatively well, continuing its gains from last month. The S&P Pan Arab Shariah returned 2.99% over the month, while the GCC Composite Shariah did even better with 3.12%.
Overall, the S&P Emerging BMI Shariah was down by -2.14%, continuing the poor performance it placed in March, while the Developed BMI Shariah gained a marginal 0.92%.
The property market continued its slight upwards trajectory, with the S&P Global Property Shariah gaining 1.33%, although the Global REIT Shariah echoed the conventional index to lose -1.9% over the same period. Global infrastructure remained flat at 0.16%.
The Islamic asset management market had a busy month in April, with multiple markets seeing a pickup in activity. Oman’s Meethaq Bank signed a new deal with Azimut Group to promote its Global Sukuk Fund, in what deputy CEO Sulaiman Al Harthy called the first step for niche Islamic investing in the country. In the UAE, the Dubai Financial Market released a new draft Shariah standard on investment funds, which introduces new regulations for the sector and clarifies the technical requirements for the management of funds. Also in Dubai, Emirates REIT manager Equitativa announced its intention of launching a new education-based REIT in India within the next few months, which could potentially open up a whole new asset class for the industry. The UAE-based group is also believed to be exploring opportunities in the logistics and warehousing real estate sectors. In Saudi Arabia, the Capital Market Authority approved Saudi Fransi Capital’s request to list its Shariah compliant Bonyan REIT Fund on Tadawul.
Moving east, Malaysia has been a hotbed of asset management activity, albeit with a firmly regional focus. Public pension fund Employees Provident Fund (EPF) is seeking more quality Islamic assets and has opened up to hiring more external managers to assist in its booming Shariah mandate, which currently accounts for around 45% of the fund. Manulife Asset Management launched its new Manulife Investment Shariah Progress Plus Fund looking at regional markets in Asia Pacific, Public Mutual launched a new e-series fund called the Public e-Islamic Flexi Allocation Fund investing in equities and Sukuk and PMB Investment opened the PMB ASEAN Stars Equity Fund looking at Malaysia, Indonesia, Thailand, Singapore and the Philippines and aiming to hit US$40 million by the end of the year.