IFN weekly market roundup: 14th – 20th July 2018

Date: Jul 2018

Daily Cover

This week, the global Islamic capital market was buzzing with activities, including new Sukuk plans from Iranian corporates, RAM Ratings maintaining its Sukuk projections for the year and laws accommodating Sukuk listing in Nigeria. All these and more in this week’s IFN Weekly Market Roundup.

NSE’s rules for Sukuk listing approved

The Nigerian Stock Exchange (NSE) has received regulatory approval for its Rules Governing the Listing of Sukuk and Similar Debt Securities, effective from the 23rd July 2018. The rules discuss the definition of Sukuk and similar debt securities, as well as cover admission requirements, among others. This comes 10 months after the nation’s debut sovereign Islamic paper, issued in September last year.

Iran’s corporate Sukuk market to grow

Despite a fall in total global Sukuk issuance by 5.2% year-on-year as at the end of June 2018, RAM Ratings is maintaining its projected global Sukuk issuance at US$75-85 billion, based on the growth trends in Sukuk issues from Malaysia, Indonesia, Bahrain, Kuwait and the UAE in the first six months of 2018.

In line with this, this week we saw several sovereigns and corporate entities float their regular issuances. Iran’s corporate debt capital market was the center of attention as two more companies jumped onto the Sukuk bandwagon. Kian Capital Management reported that Iran Health Insurance Organization’s CEO approved the issuance of IRR10 trillion (US$230.14 million)-worth of treasury bills, whereas Agah Group reported that Isfahan Steel Company will float Sukuk Salam worth IRR3 trillion (US$69.04 million), following announcements last month by  Saba Naft Engineering and Construction Company and Khuzestan Cement to print respective Sukuk papers.

Affin Hwang becomes first supplier and user of ISSBNT model

Bursa Malaysia approved Affin Hwang Investment Bank as a supplier and user under the former’s Islamic Securities Selling and Buying Negotiated Transaction (ISSBNT) model. The appointment will see Affin Hwang undertake the buying and selling of Shariah compliant securities for its own account and become agents for large beneficial owners’ ISSBNT activities. The ISSBNT framework, rolled out in December 2017, is the world’s first framework for Islamic securities borrowing and lending activities.

Bank Nagari urged to convert

In Indonesia, banks are expanding business and capital-raising avenues. The governor of West Sumatra, Irwan Prayitno, has reportedly ordered the conversion of Bank Nagari into Islamic. With five years to go until the deadline imposed by Bank Indonesia for banks to split their Islamic operations into a separate entity, Bank Nagari has to decide if it is to convert into a fully-fledged Islamic bank or spin off its Islamic arm.

Separately, BNI Syariah is looking to float an IPO, and is speeding up its plans to become Bank Umum Kelompok Usaha (BUKU) III, both in 2019. The BUKU II initiative was initially targeted to be completed by 2020. The bank also rolled out Hasanah Digiverse, its digital banking services.

AXA Liabilities Manager buys Emirates Re

Global firm, AXA Liabilities Manager, bought a majority stake in Emirates Re, a re-Takaful provider in the UAE. The sale was advised by Norton Rose Fulbright.

IFSB issues working paper on Takaful

The IFSB has rolled out a working paper on Takaful titled ‘Issues Arising from Changes in Takaful Capital Requirements’. The paper, which is the IFSB’s eighth working paper, looks at, among others, regulatory and stability issues arising from global capital regulation for the insurance sector and their implications on Takaful solvency requirements. Previous working papers focus on the betterment of the Islamic industry, in areas such as non-compliance risks of banks, consumer protection, as well as on Shariah compliant deposit insurance schemes.

UAE implements AAOIFI standards

The UAE announced that it will be adopting the AAOIFI standards in its jurisdictions following the recommendation of the Higher Shariah Authority of the Central Bank of the UAE. This applies to all fully-fledged Islamic banks, Islamic windows of conventional banks and finance companies offering Shariah compliant products and services, with effect from the 1st September 2018.

This follows the release of seven AAOIFI standards by the Securities and Exchange Commission of Pakistan for public consultation in February this year.

MARC issues methodology on impact bonds

The Malaysian Rating Corporation (MARC) released its new methodology for assessing green bonds, social bonds or sustainability bonds including Sukuk, named the Impact Bond Assessments criteria and issued under Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk Framework.

Rating agencies are increasingly pledging their support and commitment to environmental, social and governance (ESG) and SRI causes. In 2016, RAM Ratings, S&P Ratings, Moody’s Investor’s Services, Dagong Global, Scope and Liberum Ratings became signatories of the UN-supported Principles for Responsible Investment’s Statement on Environment, Social and Governance in Credit Ratings.

New chairmen for LTH and Al Baraka Banking Group

Following the resignation of Abdul Azeez Abdul Rahim as chairman of Malaysia’s pilgrim fund, Lembaga Tabung Haji (LTH), in May amid an investigation by the Malaysian Anti-Corruption Commission into contractor appointment involving projects by LTH, the fund appointed Mohammed Nor Md Yusof and Zukri Samat as the chairman and group managing director/CEO respectively.

In Bahrain, Al Baraka Banking Group engaged in the restructuring of its Shariah board. Following the resignation of the Shariah board’s chairman, Sheikh Dr Abdul Sattar Abu Ghuddah, Sheikh Dr Abdulla Sulieman Al Mannea became the new chairman and Sheikh Dr Abdullatif Al Mahmood was appointed as the vice-chairman of the board.

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