IFN weekly market roundup: 21st – 27th July 2018

Date: Jul 2018

Daily Cover

Iran dominates Sukuk market; major management reshuffle in leading Islamic finance markets; and new Islamic finance-related rules take effect – all these and more in this week’s IFN Weekly Market Roundup. 

Iran dominates Sukuk market 

The Sukuk market was bustling with activities particularly from Iran. IFN was informed by the Securities and Exchange Organization of Iran (SEO) that SAIPA Corporation issued a four-year Sukuk Ijarah facility worth IRR3.9 trillion (US$88.56 million) with an 18% coupon rate. The SEO also gave its approval for Kerman Motor’s mortgage-backed Sukuk, while Reil Seir Kowsar is planning to float a four-year Sukuk Ijarah facility worth IRR300 billion (US$6.82 million). 

Saudi launches primary dealers program for Sukuk distribution 

The first edition of the primary dealers program for Sukuk distribution under the Saudi Arabian Government SAR-denominated Sukuk program was conducted by the Debt Management Office of the Ministry of Finance this week. About 20 investors from various financial institutions and asset managers submitted their bids via an electronic auction platform. 

SMF expands Islamic operations 

Indonesia’s Sarana Multigriya Finansial (SMF) has launched an Islamic arm with a focus on home financing earlier this week, with plans to provide securities transaction securitization of Shariah asset-backed securities in the form of a letter of participation. SMF also rolled out a standard operating procedure for Islamic banks in providing funds to housing developers. 

Physical Gold Fund certified as Shariah compliant 

IFN exclusively revealed that Physical Gold Fund received endorsement as Shariah compliant by Dubai’s Amanie Advisors based on AAOIFI’s Shariah Standard on Gold. The approval is expected to pave the way for the fund’s global expansion strategy particularly in key Muslim markets. 

ADIB plans capital-raising exercise 

Abu Dhabi Islamic Bank (ADIB) has proposed to raise US$750 million through perpetual Tier 1 Sukuk. The bank also recommended to increase its issued capital by AED464 million (US$126.31 million) by issuing 464 million new shares at a nominal value of AED1 (27.22 US cents) per share as well as an issuance premium of AED1.16 (31.58 US cents) per share, bringing the total value of the rights issue to AED1 billion (US$272.21 million). These plans are subject to regulatory approval. 

Central Asia ups Islamic finance game 

Kyrgyzstan, in partnership with the IDB, is seeking technical partners to set up the Republic’s first fully-fledged Islamic bank. The bank is expected to be one of the biggest in the nation with a target capital of approximately US$25 million. 

Uzbekistan is also reportedly mulling Islamic finance regulations and looking to establish an Islamic finance institution. The plan is part of the government’s efforts to rejuvenate the nation’s economy by boosting the banking industry and attracting foreign interest. 

Indonesia issues Fatwas on asset-backed securities 

In a move to diversify Indonesian debt capital market offerings, the National Shariah Board of the Indonesian Council of Ulama issued two Fatwas on Shariah compliant asset-backed securities. The first Fatwa is on asset-backed securities in the form of participation based on Shariah principles, whereas the second Fatwa is on securitization in the form of asset-backed Islamic securities. 

Inaugural Islamic cryptocurrency exchange in the making 

The world’s first Islamic cryptocurrency exchange is in the works with an agreement between Singapore’s DS Media Concepts and Five Pillars. Named as HalalDEX, it will also be Singapore’s first decentralized cryptocurrency exchange, and is expected to be ready by the end of September. 

Carrefour supermarkets in mosque districts via Islamic financing 

In Indonesia, Trans Retail Indonesia and the Indonesia Mosque Council are reportedly planning to jointly open Carrefour supermarkets in up to 300 mosque districts using Islamic social finance funds such as Sadaqah and Waqf and potentially bank financing or microfinancing. This follows an MoU between both entities, and will have the revenues of the supermarkets shared between the two parties. 

Rasmala targets commercial real estate 

Despite a dip of around 50bps in the yields on European logistics assets since the beginning of the year, Rasmala plans to deploy over US$500 million into commercial real estate in the second half of 2018. The Islamic investment manager will focus on logistics assets and prime office properties in the UK, Ireland, Germany, Austria, the Netherlands and the US. 

Major market moves 

Criticisms from governments in Iran and Malaysia have triggered major management shake-ups in influential institutions. 

In Iran, the Central Bank of Iran’s governor, Valiollah Seif, was replaced by Abdolnasser Hemmati. Valiollah, who has been the bank’s governor since 2013, was heavily criticized for his handling of a currency crisis which saw the country’s currency lose more than half its value against the US dollar in the past year. He was also hit by US sanctions on allegations that he moved millions of US dollars to Iran’s elite Revolutionary Guard. 

In Malaysia, the entire board of directors of sovereign wealth fund Khazanah Nasional, a major Islamic investor, offered to step down. This followed comments from Prime Minister Dr Mahathir Mohamad that the fund has deviated from its purpose of helping Bumiputeras.

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