In IFN’s monthly analysis, LAUREN MCAUGHTRY brings you a comprehensive review of global Islamic markets. As we swing into the third quarter, the month saw its usual surge of activity, with corporates cantering back to market and several benchmark-sized Sukuk hitting the books. Equity markets stayed static but banks were active across the board, especially in terms of digital developments, while REITs led the charge on the Islamic funds front.

Deals
The usual suspects maintained the short-term market over September — including AEON Co, Sunway, Bina Darulaman, and on the sovereign side Bangladesh, Brunei, Gambia, Kuwait and Malaysia.

On the corporate side, September saw the usual rush back to the market after the summer lull. In Malaysia, Tropicana Corporation sold a perpetual Sukuk facility worth RM248 million (US$59.29 million) with a 7% profit rate, while IJM Land also issued a perpetual facility of RM200 million (US$47.82 million) with a rate of 4.73%. CIMB Islamic printed an Islamic paper worth RM800 million (US$191.27 million) and Maybank Islamic placed three commercial papers worth RM1.5 billion (US$357.95 million).

Trinity Asia Ventures issued a RM52 million (US$12.44 million) Sukuk Musharakah paper, Digi placed two medium-term notes for RM900 million (US$214.59 million) and Lembaga Pembiayaan Perumahan Sektor Awam issued two medium-term notes worth RM1.3 billion (US$310.61 million) and RM1 billion (US$238.93 million) with tenors of 21 years and 29 years respectively.

In the Gulf, Emaar Properties raised US$500 million in a 10-year facility that received orders over US$2.5 billion, while DP World issued a 10-year facility also worth US$500 million as part of a larger US$1 billion issuance. Warba Bank in Kuwait raised US$500 million with an orderbook exceeding US$3.16 billion — an oversubscription of 6.32. The IDB has hired banks to raise a further US$1.5 billion in a five-year Sukuk issuance, and Turkey’s Vakif Katilim issued Sukuk worth TRY525 million (US$92.06 million) in a rare occurrence for the Turkish corporate market.

In terms of sovereigns, Qatar printed two Sukuk at QAR800 million (US$218.42 million) each, at three and five years respectively. Saudi Arabia raised SAR8.83 billion (US$2.35 billion) through its September issuance under its domestic Sukuk program, and the UK invited tenders for the reissuance of its sovereign Sukuk, with plans for a further GBP200 million (US$243.44 million) in early 2020.

Banking
Good and bad news for Islamic banks this month. In the UAE, Emirates NBD’s decision to raise its foreign ownership limit to 20% from 5% — with plans to raise it yet further to 40% following shareholder approval — could attract new capital flows and accumulate further firepower for regional deals.

Emirates NBD also announced an upcoming new digital bank targeted at SMEs, as did Mashreq Bank, while National Bank of Fujairah started utilizing Ripple’s blockchain technology for international transfers and Abu Dhabi Islamic Bank’s digital transaction banking platform (ADIB Direct) went live.

The Central Bank of Libya issued a new license to the Bank of Commerce and Development to launch an Islamic bank, Bahrain Islamic Bank is evaluating a voluntary takeover bid from National Bank of Bahrain, Mercantile Bank in Bangladesh is set to establish an Islamic banking window and Bank Islami Malaysia started its new digitization program. On the downside, three US law firms are taking Kuveyt Turk to court for allegedly supporting terrorism.

Sovereign and supranational
It’s been a green kind of month — CIMB Islamic became a founding member of the new UN Environment Program’s Principles for Responsible Banking; Kazakhstan’s Astana International Financial Centre confirmed plans to work on developing green Sukuk issuances; the Dubai Islamic Economy Development Centre teamed up with Dubai International Financial Centre, Dubai Financial Market and Climate Bonds Initiative to promote the green Sukuk sector; and the IDB partnered with the UN Development Programme to work toward achieving the UN Sustainable Development Goals and to launch the new NGO Empowerment for Poverty Reduction Programme.

In other news, Bank Negara Malaysia issued new Shariah governance guidelines, Brunei’s regulator issued new guidance on product transparency and disclosure for Islamic banks, Iran is planning an international stock exchange to open in February 2020 and Saudi’s Tadawul completed full inclusion into the MSCI Emerging Markets Index.

Performance
Islamic equities recovered slightly in September from a poor performance the previous month, with the S&P Global BMI Shariah returning 0.77% — although this was substantially lower than its conventional benchmark, which returned 1.75% over the same period. The gains were infinitesimal, however, as investors remain wary in a market rife with trade tensions and which saw oil prices spike following the Aramco oil facility attacks in Saudi Arabia, leaving the markets nervous.

The S&P Pan Asia Shariah rose 1.35% while the S&P GIVI Pan Asia Ex. Japan Shariah Index (US Dollar) flatlined at 0.4%.

The S&P GCC Composite Shariah also stayed flat with a 0.43% return, while the Pan Arab Composite Shariah did the same at 0.26%, as did the comparable Pan Arab Investable index (also 0.26%).

The Pan Africa Shariah, which collapsed in August with a decline of -6.28%, recovered slightly to report a loss of just -0.16%.

Overall, the S&P Emerging BMI Shariah gained 0.75%, but the Frontier BMI Shariah plummeted by -4.06%. The S&P Developed BMI Shariah gained a marginal 0.78%.

Finally, the Global Infrastructure Shariah Index lost -0.09%. The S&P Developed Property Shariah lost -0.28% while the Global REIT Shariah (USD) Index lost -0.79%.

Asset management
September saw asset management activity pick up slightly, particularly in the real estate arena. Saudi’s Derayah REIT acquired a group of logistic properties for SAR54.65 million (US$14.56 million), while Al Maather REIT completed the acquisition of Towlan Hotel Suites in Al Khobar for SAR22 million (US$5.89 million), and both Bonyan REIT and Taleem REIT started the registration process with the General Authority of Zakat and Tax for Zakat purposes.

Also in Saudi, Alkhabeer Capital confirmed its new Waqf fund, to be launched in the fourth quarter of the year — and successfully exited from the Alkhabeer Land Development Fund II, with 44.6% in net cumulative returns to investors.

In Kuwait, KFH Capital Investment Company obtained new licenses for its KFH Capital Markets Fund and the healthcare-focused KFH Investment Scheme, while in Bahrain KFH-Bahrain launched a new range of private banking and wealth management services including Sukuk and Sukuk leverage products. In Pakistan, the stock exchange approved the formal listing of the JS Hybrid Fund of Funds.