IFN weekly market roundup: 7th – 13th July 2018

Date: Jul 2018

Daily Cover

Throughout the week, two themes persisted: new regulations are underway, and the industry is making a statement in a series of firsts. Read more in this week’s IFN weekly market roundup.

Malaysia’s first Shariah ESG SRI equity fund launched 

Malaysia’s first Shariah compliant sustainable and responsible investment (SRI) equity fund, under the Securities Commission Malaysia (SC)’s SRI guidelines, was rolled out in a collaboration between BIMB Investment, Arabesque and ValueCAP. Najmuddin Lutfi, CEO of BIMB Investment, confirmed with IFN that the Shariah compliant asset manager is in the process of securing SRI status under the SC’s SRI framework for its existing three environmental, social and governance (ESG) funds. A global ESG Sukuk fund is also in the pipeline.

Singapore’s first Islamic bilateral hotel financing

In a first for the nation, Royal Group has secured a SG$300 million (US$221.28 million) financing from RHB Bank Singapore for the five-star SO Sofitel Singapore Hotel. It is Singapore’s first Islamic bilateral hotel financing transaction and the first Islamic real estate financing in Singapore’s core central business district. It is also said to be one of the largest Islamic hotel financing deals globally.

First blockchain platform for Islamic capital markets

In another first, the creation of Wethaq, the world’s first platform for Islamic capital markets using smart contracts and legal automation, is underway via the joint venture agreement signed between ArabianChain Technology and Curiositas.

Niger’s Sukuk plans falter

Just about a week after market players’ calls for quicker progress in Islamic finance regulations, the State of Niger in Nigeria has gone one step backwards as the Niger State House of Assembly rejected a proposal by Governor Abubakar Sani Bello to issue a NGN21.5 billion (US$59.53 million) Sukuk paper. According to the Daily Trust quoting Alhaji Abdulmalik Kabir, the chairman of the special committee on Sukuk, among the reasons given were the costs which were said to be unaffordable and that the due process was not followed in the selection of contractors for the projects under the paper.

The government also requested lawmakers in the House of Assembly to stop deliberations on the Sukuk proposal; it asked the assembly to stay action on the request because of insinuations in some quarters that the money was meant for the 2019 elections, This Day reported.

But there is still hope, however, as the proposal could still be presented again if the issues are addressed, said Alhaji Ahmed Marafa Guni, the speaker of the House of Assembly, as reported by The Sun.

New regulations in the making

This week, we saw major Islamic finance players around the world working on enhancing their regulations. The Central Bank of the UAE’s Higher Shariah Authority discussed a number of matters related to prudential standards and regulations for the Islamic finance banking system, as well as the Shariah compliant capital market and Shariah governance in the UAE. Also discussed were a draft standard for Sukuk and additional standards for Shariah governance.

In Pakistan, the government passed resolutions requesting, among others, to speed up processes to remove Riba-based transactions and to convert at least 30% of all new government debts to Islamic.

Bursa Malaysia issued a consultation paper in relation to exchange-traded funds (ETFs). The amendments include liberalizing the interim reporting frequency from a quarterly to a semi-annual basis; enhancing the contents of ETF interim and annual reports arising from various new ETF products and their specific requirements; and enhancing the immediate announcement requirements to promote greater transparency in relation to the index or benchmark tracked by the ETF.

Mindanao looks at Sukuk for development

The Philippines is inching closer to its first-ever Sukuk issuance with the request of the Mindanao Development Authority (MinDA) to the president of the Philippines, Rodrigo Duterte, to order a study of the viability of using Sukuk funds for infrastructures and other private-led projects in Mindanao through the state-owned Al Amanah Islamic Bank, according to MindaNews citing the executive deputy director of MinDA, Romeo Montenegro. Montenegro was quoted as saying that Mindanao needs Islamic financing as most conventional banking institutions would not go to areas in Mindanao that need funding, citing security issues, financial viability and market size.

Center of excellence on Islamic social finance in the works

The Shariah social finance sector is poised for an uplift as the Islamic Research and Training Institute is considering collaborating with the United Nations Development Program, the Indonesian Financial Services Authority and the Indonesian Ministry of Finance to establish a center of excellence on Islamic social finance.

1MDB names new chairman for executive committee

1MDB, Malaysia’s state investment fund that is embroiled in an international corruption scandal, has reportedly appointed Mohammad Faiz Azmi as the chairman of its executive committee. Mohammad is the executive chairman of PwC Malaysia and will represent the audit firm on the committee as part of its services in assisting the board and the exco to recover 1MDB’s assets and in managing the company’s debt. The committee, along with Faiz, comprises of Rashidah Mohd Sies and Wan Mohd Fadzmi Wan Othman and will manage the day-to-day running of the company.

Saudi insurers merger called off

In Saudi, the merger talks between Allied Cooperative Insurance Group and Malath Cooperative Insurance & Reinsurance Company were dropped as both parties failed to reach a preliminary agreement on company evaluation methods.

This comes in the wake of the merger waves that recently hit Saudi’s Takaful industry, with separate merger discussions between Al Ahlia Cooperative Insurance Company and Gulf Union Cooperative Insurance Company, as well as Al Sagr Cooperative Insurance Company and Walaa Cooperative Insurance Company.

Walaa Cooperative Insurance Company also divested 4,096 fractional shares, raising SAR117,397.36 (US$31,282.5), on the 6th June 2018.

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