April and May looked to be banner months for sukuk. Two deals, one from the Saudi Electricity Company (SEC) and the other, from Banque Saudi Fransi, the Saudi lender part-owned by Credit Agricole, marked two rare but popular US dollar denominated issues which were highly prized by investors. The benchmark deals helped underscore growing investor appetite for Islamic bonds.
Saudi Fransi, Saudi Arabia’s fifth largest bank, launched $750m five-year Islamic bond mid-month at par amid strong investor demand for the issue in mid-May. The issue is the bank’s first sukuk sale under a recently-established $2bn debt programme.
The rapid international expansion of Islamic finance reflects its ability to remain competitive and to increasingly meet the complex requirements of the global financial community.
With various countries now intensifying efforts to develop their respective Islamic financial capabilities, it is becoming increasingly vital to build deeper relationships between the key markets for Islamic finance and also between the leading industry players in each of these jurisdictions.
Central banks from seven Muslim countries yesterday launched a regulatory body to oversee the booming Islamic investment market. The Islamic Financial Services Board (IFSB) was inaugurated here by founding members Malaysia, Saudi Arabia, Indonesia, Iran, Kuwait, Pakistan, Sudan and the Islamic Development Bank.
On a recent sunny day, Eric Swats, a fund manager at Rasmala Investments, sat under a parasol at a restaurant on the terrace of the Dubai International Finance Center, talking up his new $25 million Rasmala Global Sukuk Fund.
Mr. Swats hopes it will tap into fast-growing demand from Middle Eastern and Asian investors for sukuk, securities that comply with Islamic law. “The market for conservative and well-managed” Islamic finance products is “underserved and underdeveloped,” he said over a lunch of salad and fruit juice.
Traditionally, Islamic banks have outperformed their conventional peers in most markets. However, a closer look suggests the market dynamics are changing, demonstrating a new trend. Two key indicators are cause for reflection: slowing growth rates and eroding profitability, A.T. Kearney, a global management consultancy, said Monday.
Declining growth rates are occurring in key geographies including Saudi Arabia, Bahrain and the UAE, where growth rates have dropped to between 3 and 8 percent from double-digit figures. In parallel cost income ratios are increasing in most markets, putting pressure on profitability.
Global Islamic insurance sales rose nearly 20 per cent to US$8.3 billion (Dh30.48bn) in 2010, but opportunities still abound for further expansion, a new report has found.
Takaful contributions in the UAE grew by 28 per cent to reach $818 million during the year, said Ernst & Young's World Takaful Report 2012.
Global Islamic insurance contributions surged 19 percent in 2010 to $8.3 billion helped by Saudi Arabia, the world’s biggest oil exporter, which made up more than half the industry, an Ernst & Young report said.
The six-nation Gulf Cooperation Council, which also includes the United Arab Emirates, Qatar, Bahrain, Oman and Kuwait, made $5.68 billion of Islamic insurance or takaful contributions in 2010, and South East Asia $2 billion, according to the World Takaful Report 2012 e-mailed today.
A long-awaited mega Islamic bank to be headquartered in Bahrain may be launched this year and $600 million of its $one billion capital will be contributed by Islamic banks in the Arab region, a senior banker has said.
The remaining capital will be subscribed by local sovereign wealth funds and other financial institutions and investors, said Adnan Youssef, chairman of the Beirut-based Union of Arab Banks (UAB).
Bankers expect a bumper year of bond sales in Saudi Arabia following the success of the country’s first sovereign-guaranteed sukuk in January.
The 15bn riyal ($4bn) Islamic instrument, issued to finance the expansion of Jeddah’s international airport, was the largest single-tranche sukuk yet, says HSBC, which led the issuance. It was sold at a profit rate of 2.5 per cent and was 3.5 times oversubscribed.
The momentum of global sukuk issuances has continued during January to reach $20.2 billion an annual increase by 23.1 percent, Kuwait Finance House Research LTD. (KFHR) reported yesterday.
According to the report, this huge figure of issuances is due to the $9.7 billion issuance announced by Plus Expressways Berhad, the biggest company in construction and operation of highways in Malaysia.
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