Emerging from a sleepy week, the past seven days has seen market activities pick up across the Sukuk landscape (both sovereign and corporate), banking segment and asset management space with Indonesia featuring prominently. Financial results from Middle Eastern institutions are also rolling in with some (un)surprising results compelling firms to re-think their Islamic business strategy in the face of tough economic conditions.
SOVEREIGN SUKUK
Determined to boost its Shariah financial industry and simultaneously plug its budget deficits, the Indonesian government is tapping its enormous population base by offering retail Sukuk beginning today until the 4th March. Offering a yield of 8.3%, the finance ministry expects to raise IDR25-30 trillion (US$1.85-2.22 billion) from the sale. The government will also issue a dollar Sukuk in March according to Bloomberg. Separately, the finance ministry on the 26th February will hold a Shariah securities auction targeting institutions; indicative target has been set at IDR4 trillion (US$295.6 million).
Snapping at its heels, neighboring Malaysia is also reportedly in the process of floating a benchmark-sized dollar Sukuk next month. The government, according to Bloomberg, has requested banks to submit proposals.
Nigeria, on the other hand, is moving steadily toward its long-planned inaugural sovereign Sukuk issuance. Although the facility has not been approved by the Securities and Exchange Commission (SEC), a committee has been set up by the SEC and Debt Management Office to study potential modalities for the program, according to the Republic’s state-run news agency.
CORPORATE SUKUK
Malaysian corporates have had a strong showing in the Sukuk space this week with offshore marine services provider Perdana Petroleum poised to enter the market with a RM650 million (US$155.58 million) five-year Sukuk Murabahah program. Public-listed Sunway Group, which has been consistently issuing short-term Islamic commercial papers, yesterday floated its 57th series worth RM100 million (US$23.94 million).
Over to the Middle East, Singapore’s offshore support vessel owner Vallianz Holdings tapped the Saudi Sukuk market for the first time with a SAR1 billion (US$266.53 million) Sukuk facility via Rawabi Vallianz Offshore Services while Saudi Electricity Company has decided to upsize its Sukuk program from US$1.5 billion to US$2.5 billion.
ISLAMIC BANKING
Looking to attract Islamic investments to its shores, Russia will open its first fully-fledged Shariah compliant bank in March in the city of Kazan in March. To be known as The Partnership Banking Center, Russia Beyond The Headlines reported that the bank, which will target both retail and corporate segments, is also expected to sign an agreement with the IDB.
While a new Russian player is anticipated, it seems that Indonesia’s plan to create a Shariah megabank has stumbled onto another hurdle. With plans to establish a holding company by 2018 to oversee the management of four state-owned banks: Bank Rakyat Indonesia, Bank Mandiri, Bank Negara Indonesia and Bank Tabungan Negara, DealStreetAsia says that the Ministry of State-owned Enterprises has scrapped plans of merging the Shariah units of these banks.
ASSET MANAGEMENT
With new regulations in place, Indonesian asset managers are making a dash to roll out Shariah funds. This past week saw three companies launching new Islamic funds: Schroder Investment Management Indonesia, BNP Paribas Investment Partners, and Manulife Aset Manajemen Indonesia. These funds are all US dollar-denominated and offer investors exposure to the global market.
RESULTS
Encouraging results were seen for several Islamic banks including Abu Dhabi Islamic Bank (net profits rose 10.29%), Emirates Islamic (net profits up 76%) and Amlak Finance which swung to profits after a year of losses.
However, several other players reported a disappointing performance. Bahrain’s Inovest saw net losses deepen to US$53.7 million, from a loss of US$3.8 million the year before as a result of the Islamic investment company making provisions against certain investments to safeguard against a turbulent year, while Arab Insurance Group saw its balance sheet turn red with a net loss of US$4.4 million. As a result, the insurance operator has decided to cease underwriting activities of its loss-making subsidiary, Takaful Re.
MOVES
After months of speculation, Bank Negara Malaysia governor Dr Zeti Akhtar Aziz has confirmed that she will be stepping down in April after helming the bank for 16 years. Emirates REIT Management’s senior executive officer Hannah Jeffery has left the company, leaving her duties to be absorbed by the firm’s executive deputy chairman. Pakistan’s UBL Fund Managers has appointed a new CEO (Yasir Qadri) while Elian names Paul Lawrence as head of European funds.