Where there’s a will … In this issueislamicfinancenews.com/sites/default/files/newsletters/v... · 2016. 3. 31. · HSBC Amanah Takaful (Malaysia) ... American Muslim investors,

Vol. 6, Issue 40 9th October 2009

T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r

In this issue

IFN Rapid ..................................................... 2

Islamic Finance News ................................ 3

Takaful News ............................................11

Rating News .............................................12

IFN Report:Sukuk Going Once, GoingTwice … Sold!..........................................14

Crème de la crème ................................15

Articles:The Development of Islamic Financein Japan ...................................................16

Linking Shariah-Based Products and Socially Responsible Investing ............18

Islamic Finance and Global Financial Stability ...................................................20

Meet the Head ..........................................22Hooman Sabeti-Rahmati, Counsel of Allen & Overy

Termsheet ..................................................23CIMB Islamic’s Tier 2 Junior Sukuk Program

Moves .........................................................24

Deal Tracker ..............................................25

Islamic Funds Tables ................................26

S&P Shariah Indexes ...............................27

Dow Jones Shariah Indexes ....................28

Islamic League Tables .............................29

Thomson Reuters League Tables ...........32

FTSE Shariah Indexes ..............................35

Events Diary...............................................36

Country Index ............................................37

Company Index .........................................37

Subscription Form ....................................37

It is generally acknowledged that the different schools of thought and their different interpre-tations have to a certain extent hampered the development and spread of Islamic fi nance.

The Islamic Financial Services Board, the Ac-counting and Auditing Organization for Islamic Financial Institutions and similar bodies, in ad-dition to some regulators, have been striving to sort this out but there has been limited suc-cess. Even the master agreements that some bodies have drawn up for certain Islamic fi nan-cial facilities have had few takers.

There is growing concern that if these differ-ences remain unchecked, Islamic fi nance could never become popular, even among Mus-lims. That would be a shame, as it is a fact that the Islamic fi nance system would never have allowed the emergence of certain key issues that led to the derailment of the conventional fi nancial system and the consequent global fi nancial crisis. There is a general consensus within the international community that they have to work together in developing a fi nancial system which is stable and sustainable, bury-ing for good the bust-and-boom cycle.

It is obvious that to be accepted as a truly glob-al force, Islamic fi nance needs to be embedded within the new international fi nancial struc-ture. This infusion will give the new framework a moral and ethical fi ber as well as ensure that the fi nancial system serves the economy at large, not spin off into an unregulated practice of its own, with greed as its driver.

As Malaysian central banker Zeti Akhtar Aziz points out in a keynote address (which ap-pears as a Focus article in this issue), when Islamic fi nance works its way into becoming an integral part of the global fi nancial system, it will be increasingly exposed to risks of fi nan-cial stress arising from global fi nancial insta-

bility and economic activity. It therefore needs to be robust enough to not only stave off these challenges but also strengthen itself within such an environment.

The advantage that Islamic fi nance has is its in-built dimensions of governance and risk management that help safeguard it. Even so, Islamic fi nance will have to strengthen its reg-ulatory and supervisory framework such that this becomes a comprehensive infrastructure that can meet challenges.

For this to happen, unity of purpose as well as a commitment to work together as a single force with a single voice is essential.

For Islamic fi nance to be internationally ac-cepted, practitioners, regulators and scholars from all schools of thought must ensure that there is mutual recognition of fi nancial stan-dards and products across jurisdictions. Zeti reports that there has already been progres-sive convergence of Shariah views and rulings, as well as the mutual recognition of fi nancial standards and products across jurisdictions.

She stresses that greater engagement among the regulators, practitioners and scholars is important, as they need to be uniform in their views when staking a place for Islamic fi nance during the negotiations for a new fi nancial or-der. Among others, they need to agree whether the new standards being introduced can be applied to Islamic fi nance and whether modifi -cations need to be made.

Muslims and non-Muslims will be glad to see the day when Islamic fi nance products and facilities are uniform in all jurisdictions, with even the spelling of terms standardized, so that everyone knows with certainty what one gains from it. It can be done. All it needs is the will.

Where there’s a will …

BRUNEI 20 October 2009th

www.islamicfi nancenews.comA round-up of all this week’s news IFN RAPID

Page 2© 9th October 2009

NEWSUganda to open its doors to Islamic fi nance • soon

Saturna Capital Corporation• launches investment fund targeting American Muslim investors

StoneCross Capital • launches fi rst Islamic longevity collateralization platform strategy

ICD• to help Jamsostek create an Islamic investment house

Islamic fi nance to be a primary driver of • economic growth in Malaysia

US$112 million Islamic investment fund on • the cards for SBI Holdings

Secondary trading platform for Islamic • paper in the works for Bursa Malaysia

Pawnbroking business turns lucrative for • Bank Rakyat

Industrial and Commercial Bank of • China’s foray set to spark Islamic banking

March date for India’s fi rst Islamic fi nancial • institution

Khazanah Nasional• to sell a US dollar denominated exchangeable Sukuk in 2010

Pengurusan Aset Air • launches US$5 billion Sukuk

Bank Negara Malaysia• : Greater global collaboration needed

Indonesian government considers issuing • short-term Sukuk

Lembaga Tabung Haji• to double its stake in Bank Islam Malaysia

Bank Islam Brunei Darussalam• : Sultanate seeks Islamic fi nance expertise

Port of Tanjung Pelepas• to issue government-guaranteed Sukuk worth up to US$585 million

Malaysia to court Qatari investments in • Islamic fi nance

Dallah Albaraka Group• believed to be front runner for one of the two “mega international Islamic bank”

Asian Finance Bank• hit the US$289 million mark in corporate funding by end 2009

Maybank Investment Bank• , CIMB Group Holdings and Public Investment Bank to sell Sime Darby Sukuk

New • Islamic Bank of Britain product promises 4.5% return a year

UK: Tax burden eases for certain Islamic • ETFs

Malaysia and France to build on Islamic • fi nance links

International Shariah Research Academy• : ‘Shariah advisors can be held liable for obvious mistakes’

Non-traditional countries cashing in on • Sukuk

DIFC• tie-up with Multilateral Investment Guarantee Agency to promote Sukuk market

Mortgage scheme where developer pays • for delays

Moody’s• : Loan loss provisions to hit the roof?

Khazanah Nasional• buys 25% stake into Fajr Capital

Qatar National Bank• denies involvement in Iranian oilfi eld development, Esfandiar

UAE: Financing carrot for • Bloom Properties property purchases

No sovereign Sukuk plans, says Saudi • government

KFH-Bahrain• to upgrade with International Turnkey Systems’ “Ethical Banking”

Tadhamon Capital • to focus on private equity

Emirates Islamic Bank• to fi nance Meydan Group’s Falcon Car Park

Boeing• : Islamic fi nancing set to gain signifi cance in the aircraft industry

Ajman Bank• offers “live” share trading

Daimler • offers Islamic fi nancing to buy Mercedes-Benz vehicles

Bahrain Financial Exchange• introduces product development working group

TAKAFULBancaTakaful venture for • Standard Chartered Bank Pakistan

Swiss Re• to open a re-Takaful operation in Kuala Lumpur

Syarikat Takaful Malaysia• to grow its market share through rebranding

Salaam Halal• to expand Takaful business to western Europe

t’azur• the Takaful pioneer in Qatar Financial Centre

Ajman Bank • collaborates with Salama Islamic Arab Insurance to boost services

RATINGSThe Insurer Financial Strength rating of • HSBC Amanah Takaful (Malaysia) affi rmed at ‘A-’

Capital Intelligence affi rms • CIMB Bank’s foreign currency ratings at ‘BBB+’ long-term and ‘A2’ short-term

Preliminary long-term rating of ‘AAA’ to • Pengurusan Air SPV’s proposed Islamic program

RAM revises the ratings of two Japanese • banks with Islamic fi nance activities

DBS Bank• ’s long- and short-term fi nancial institution ratings reaffi rmed at ‘AAA’ and ‘P1’, respectively

Bank Rakyat Indonesia• ’s proposed subordinated bond gets ‘AA+(idn)’

RAM reaffi rms • Project Lintasan Shah Alam’s ratings at‘A1’ and ‘A3’

Atlanticlux Lebensversicherung• gets an insurer fi nancial strength rating of ‘BBB’

Bank of Kuwait & the Middle East• ’s long-term issuer default rating affi rmed at ‘A-’

Fitch assigns • TDIC Sukuk’s US$1.45 billion program an expected rating of ‘AA’

HSBC Middle East• ’s US$5 billion trust certifi cates rated ‘AA-’

Abu Dhabi Commercial Bank• ’s ‘AA-’ long-term foreign currency ratings affi rmed

National Bank of Ras Al Khaimah• ’s foreign currency ratings affi rmed at ‘A-/A2’

MOVESAviva • CEO Allan Griffi ths departs

Azim Mithani is new chief for• Prudential BSN Takaful fi rm

Investment Dar • names Mike Grant as its chief restructuring offi cer

Suvrat Saigal is • Barclays’ new director of consumer banking, global retail and commercial banking for India

HSBC Amanah • global CEO, Mukhtar Hussain, to also head HSBC Malaysia

Credit Suisse• hires Goldman Sachs’ Paul Germain for prime brokerage unit

Barclays• wealth management division appoints Srinivas Siripurapu as managing director

www.islamicfi nancenews.comNEWS


AFRICAGoing for Islamic fi nanceUGANDA: The National Bank of Uganda plans to review sections of the Financial Institutions Act 2004 to introduce Islamic banking in Uganda, as the act has a number of restrictions on Islamic banking.

Its executive director of supervision, Justine Bagyenda, said the central bank staff have been trained in Malaysia on Islamic banking. “We also received technical assistance from the Islamic Development Bank,” she added.

AMERICASThird Amana fundUS: Investment manager Saturna Capital Corporation has launched the Amana Developing World Fund (AMDWX), the third in the Amana Funds family designed for American Muslim investors, after the Amana Income Fund and the Amana Growth Fund.

AMDWX’s goal is to have long-term capital growth by investing at least 80% of the assets in the common stocks of companies with 50% or more exposure to countries with developing markets.

It will predominantly follow a value investment style, said vice-president and director of Islamic investing at Saturna Capital, Monem Salam, who is also deputy portfolio manager of the Amana funds.

“AMDWX serves the rising demand for investment opportunities in emerging markets while expanding the fi eld of portfolio diversifi cation options for the American Muslim community,” he added.

Longevity platformUS: Asset management company StoneCross Capital has launched the world’s fi rst Shariah compliant longevity collateralization platform strategy to enable investors to customize a fi nancial structure that combines an existing or newly acquired Shariah compliant asset with longevity assets.

A longevity asset is an in-force life insurance policy, bought at a discount to the policy’s

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net maturity benefi t but at a premium to the policy’s cash surrender value.

By mixing non-correlated longevity assets with volatile distressed Shariah assets such as real estate and Sukuk, the fi nancial platform can assist investors to lower their volatility and recover their losses in the distressed asset over time, said the company.

This is due to the percentage of longevity assets which would over-collateralize the entire structure, thus ensuring the repayment of principal and profi t without relying on the performance of the underlying assets.

ASIAGoing into business Shariah styleINDONESIA: State employee insurance company Jamsostek plans to collaborate with the Islamic Corporation for the Development of the Private Sector (ICD), the investment arm of the Islamic Development Bank (IDB), to form an Islamic investment fi rm by the end of the year as part of its aim to improve its business.

So far, Jamsostek has readied an initial investment of IDR700 billion (US$73 million), but the total investment amount has yet to be set. Jamsostek Inc, a holding company with investments in securities, direct investment, healthcare, banking and services management, will probably be operating by 2013, said president director Hotbonar Sinaga.

Jamsostek will hold a controlling 51% stake in the new company, while ICD will hold the remaining 49 %.

A growth engineMALAYSIA: The country needs to make its Islamic fi nance sector one of the primary drivers of national economic growth, said a senior economic minister. Nor Mohamed Yakcop also wants Malaysia to forge partnerships with other countries to jointly access Islamic fi nance products in the regional markets.

“In recovering from the current global fi nancial crisis and transforming our

economy, it is vital for us to act quickly and seize early advantages to emerge as a regional or global center, which will in turn provide a sound platform for the nation’s future growth,” he added.

SBI sets up Islamic fundJAPAN: Financial company SBI Holdings plans to launch an Islamic investment fund worth JPY10 billion (US$112 million) with an equal-equity unnamed partner, as well as set up an online brokerage fi rm in India by next year, said CEO Yoshitaka Kitao.

“We would like to invite other investors once the fund is up and running,” he added without elaborating on the projects.

Kitao said SBI, whose core businesses are in asset management, brokerage and investment banking, is also keen to expand its presence in Islamic fi nancial markets such as Indonesia, Malaysia and the Middle East, and thus leverage on the growing Shariah compliant industry.

Secondary platform on the wayMALAYSIA: Bursa Malaysia, the local stock exchange, plans to launch a secondary trading platform for bonds, including Islamic paper, to stimulate retail interest in its debt market. The Malaysian bond market, which is dominated by insurers and the state pension

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fund, is rarely traded, with the limited supply causing investors to hold their paper until maturity.

The bourse is currently undertaking research on the platform and a specifi c date has not been disclosed for its rollout. “The secondary bond trading platform will benefi t the investors, compared to the over-the-counter market that has put off many retailers due its lack of transparency,” said Bursa’s global head of Islamic capital markets, Raja Teh Maimunah Raja Abdul Aziz.

Malaysia has the third-largest bond market in Asia outside Japan, after China and Korea, and traders estimate that daily trading volumes average about RM2.35 billion (US$684 million).

CIMB’s fi xed income research head Lum Choong Kuan said a trading platform could tackle the problem of illiquidity. “If there’s more liquidity, you will see people issuing more Islamic bonds and the buy-and-hold mentality may not be a hindrance to market liquidity,” he explained.

On Bursa’s commodity Murabahah trading platform Suq Al-Sila’, Raja Teh said it could extend by year-end the pool of assets from the current crude palm oil to tin, coal and aluminum.

Dominant playerMALAYSIA: Shariah compliant Bank Kerjasama Rakyat Malaysia (Bank Rakyat) plans to open four Ar-Rahnu X’Change outlets by early 2010 to double its share of the country’s RM2 billion (US$582 million) Islamic pawnbroking business from the current 25%. There are 15 outlets at present and the target is to open fi ve every year.

Managing director Kamaruzaman Che Mat said the business has become a signifi cant contributor to the bank’s performance, with loan disbursements in the fi rst eight months of this year reaching RM816 million (US$237 million) compared to the average annual total of RM1.2 billion (US$350 million).

China’s fi rst moves into Islamic banking?MALAYSIA: Local economists see plans by China’s largest bank, Industrial and Commercial Bank of China (ICBC), to expand its business in Southeast Asia as enhancing

the region’s Islamic banking sector and capital markets, besides bolstering trade among two countries.

Ernst & Young Malaysia head of assurance practice Abdul Rauf Rashid said there have been requests from clients in Hong Kong, South Korea, Japan and China to tap the Islamic banking and capital markets, adding that Malaysia has a lot to offer to China in terms of Islamic fi nancial services and its expertise in the area.

ICBC is among the top 10 banks in China which have expressed interest in setting up operations in Malaysia in the wake of

the country’s plan to further liberalize its fi nancial sector.

ICBC, which recently indicated it plans to buy Thailand’s ACL Bank, said emerging markets in Asia would be its key priority for international mergers and acquisitions. Bank of China is already operating in Malaysia.

Islamic bank in MarchINDIA: The country’s fi rst Islamic fi nancial institution is to open its doors in March in Kerala state with a capitalization of INR1

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billion (US$21 million). State fi nance minister Isaac Thomas said it will be registered as a non-banking fi nancial institution as India’s laws do not permit Islamic banks.

According to him, the institution will be privately managed albeit with government support and its Shariah board will include international representatives.

Sukuk expected in 2010MALAYSIA: State investment company Khazanah Nasional will sell a US dollar denominated exchangeable Sukuk next year, should the stock market recover, as it seeks to reduce its holdings in government-linked companies.

Exchangeable bonds are similar to convertible bonds but, unlike convertible bonds, they are not exchangeable for shares of the issuer but for shares in another company in which the issuer has a stake.

Khazanah Nasional was hoping earlier to launch an exchangeable Sukuk this year, but it was deferred as the target price of the bonds was not up to scratch, said its senior vice-president for fi nance, Mohd Izani Ghani. So far, the company has identifi ed “a few stocks” in its portfolio that could be structured into an exchangeable Sukuk.

Khazanah Nasional, which has been tapping the US dollar Islamic exchangeable bond market since 2006, owns more than 50% of fl ag carrier Malaysia Airlines and Malaysia Airports Holdings, in addition to controlling stakes in the CIMB banking group, national carmaker Proton and national power utility Tenaga Nasional.

Sukuk from utilityMALAYSIA: Pengurusan Aset Air (PAAB), a water infrastructure developer has launched a RM20 billion (US$5.88 billion) Sukuk issuance programs to help fund acquisitions and development of water infrastructures in various states.

With CIMB Investment Bank as its arranger, the Sukuk programs will involve the usage of Islamic term notes and commercial papers based on the Ijarah and Musharakah structures.

PAAB CEO Ahmad Faizal Abdul Rahman said the fi rst issuance of the facility would be

utilized to refi nance the company’s debts of about RM2 billion (US$587.4 million) while the remainder would be for working capital and capital expenditure for various projects.

RAM Ratings has assigned preliminary long- and short-term ratings of AAA and P1 to the Sukuk issuance. PAAB is wholly owned by the Minister of Finance Inc.

Global collaborationMALAYSIA: Greater global engagement is needed among standard-setting entities for Islamic fi nance to facilitate cooperation in achieving regulators’ and stakeholders’ shared interests in sustaining global fi nancial stability, said Bank Negara Malaysia governor Zeti Akhtar Aziz.

This is due to the fact that Islamic fi nance, as it continues to be integrated with the

rest of the global fi nancial system, would increasingly be exposed to risks posed by fi nancial instability and economic activities, she added. The global collaboration, she stressed, is particularly important when such standards become the basis upon which assessments are made by multilateral agencies, rating agencies and the market at large.

Zeti also called for an integrated crisis management framework as part of a more comprehensive infrastructure in order to manage any emerging crisis in the Islamic fi nancial system promptly. She added that a more facilitative and modernized legal framework is required to make Islamic fi nance more conducive for business.

She pointed out that in Malaysia, the comprehensive legal, regulatory and

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supervisory framework for Islamic fi nance is further supported by a fi nancial safety net framework that encompasses the lender of last resort facility and a deposit insurance system.

Dubai Financial Group’s stake taken upMALAYSIA: State-run pilgrim fund Lembaga Tabung Haji (LTH) will double its stake in Bank Islam Malaysia to about 20% after taking up preference shares originally allotted to another shareholder, Dubai Financial Group (DFG), the fi nancial unit of the Dubai Group.

The bank said it has raised RM540 million (US$158 million) to strengthen its capital base. When it had called for its shareholders to raise their capital input, DFG declined. Bank Islam then gave its other shareholders the option to pick up DFG’s portion and LTH subscribed to the whole amount — RM216 million (US$63.7million).

The other major shareholder, Islamic banking group BIMB Holdings, has a controlling 51% stake in Bank Islam and DFG, whose stake has now diluted to 30% from 40%, is said to be prepared to sell its stake in Bank Islam.

Seeking talentBRUNEI: Having an adequate pool of talent and expertise in Islamic fi nance is key to the development of Brunei as an Islamic

fi nancial services center in Asia, according to Bank Islam Brunei Darussalam (BIBD) acting chairman Mohammad Daud.

Noting that the growing number of Islamic fi nancial institutions has increased the range of innovative Islamic fi nancial products in the country, he added: “This progress has been supported by a rigorous and well-developed legal, regulatory and Shariah framework, thereby ensuring its stability and sustainability.”

Port eyes SukukMALAYSIA: Port of Tanjung Pelepas, owned by infrastructure group MMC Corp, plans to issue government-guaranteed Sukuk worth between RM1 billion (US$292 million) and RM2 billion (US$585 million) to fund its expansion.

The Sukuk, to be issued by year-end, will have a maturity of up to 10 years, it was reported.

Move to entice investorsMALAYSIA: The Qatari Business Association is to visit Malaysia soon to seek ways to expand that country’s investment portfolio in the Southeast Asian Islamic fi nance center.

Malaysian international trade and industry minister Mustapa Mohamed said besides inspecting various growth areas in the country, the Qatari captains of industry will also be encouraged to consider investments in Islamic fi nance and real estate.

Mega bank candidateMALAYSIA: The Dallah Albaraka Group (DAG) is believed to be a front runner for one of the two “mega international Islamic bank” licenses that Bank Negara Malaysia is offering this year to beef up Islamic fi nance’s global presence. Islamic Finance news has learnt that besides DAG, a European fi nancial institution is also keen to obtain the license.

It is expected that prime minister Najib Razak, who is also fi nance minister, will announce the successful bidders when he discloses further incentives and development strategies for the Islamic fi nance industry, contained in the country’s budget for 2010 which he will table in parliament later this month.

DAG is one of the world’s largest Islamic banking and fi nancial groups, with operations in South Africa, Algeria, Turkey,

Bahrain, Egypt, Tunisia, Jordan, Sudan, the UK and France. The group also has companies spread over 43 countries.

In April, Bank Negara announced that it will allow the creation of two mega-Islamic banks based in the country with a minimum capitalization of US$1 billion as part of measures to further open the fi nancial sector and reinforce Malaysia’s position as a global Islamic fi nancial hub.

High targetsMALAYSIA: Asian Finance Bank is set to hit the RM1 billion (US$289 million) mark in corporate funding by year-end, said CEO Mohamed Azahari Kamil. “The bank is moving in the right direction since our inception two years ago.

“We are focusing more on corporate fi nancing and in terms of corporate funded assets, the bank’s funding has shot up to RM650 million (US$187 million) from RM100 million (US$28 million) last year.”

Currently, the bank is promoting funding exercises between Malaysia and the Middle East. At the same time, it is looking to expand its business, especially in Indonesia, Brunei and South Korea. It is involved in product development in Korea and product customizing in collaboration with several fi nancial institutions in Brunei.

Sukuk due from SimeMALAYSIA: Sime Darby, the world’s largest listed plantation group, has hired Maybank Investment Bank, CIMB Group Holdings and Public Investment Bank to help it sell Sukuk. The three banks will arrange meetings with potential investors in the country later this month or in November.

Last month, Sime Darby launched a RM4.5 billion (US$1.3 billion) Islamic medium-term note program with assistance from Maybank, which was approved by the Securities Commission.

EUROPEProfi table ratesUK: The Islamic Bank of Britain said its new 24-month fi xed-term deposit account will have target profi t rate of 4.5% a year, and 4% for those preferring an 18-month period.

Government bonds to not exceed 15 yearsINDONESIA: The fi nance ministry is considering selling Sukuk with maturities of less than 15 years in its upcoming monthly auctions, said the ministry’s director in charge of Islamic markets, Dahlan Siamat. “The maturity of the Sukuk will likely be shorter as the market is still not yet developed,” he added.

The ministry is set to sell six- and 11-year Sukuk issues via its fi rst regular monthly Sukuk auction next week to develop its fl edging Islamic market and plug its 2.4% budget defi cit. It aims to raise 1.5 trillion rupiah (US$157.2 million) from the Ijarah issuance.

(Also see IFN Report on page 14)

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Customers will be offered the choice of receiving the profi t every three months or having it reinvested in the account and receiving both the deposit and profi t upon maturity.

The money added is based on the principle of Wakalah. The minimum deposit is GBP5,000 (US$7,300) which cannot be added to or withdrawn before maturity occurs.

According to commercial director Sultan Choudhury, the new product offers a combination of competitive rates and an ethical approach to investment.

The cash will be invested in Shariah compliant and ethical trading activities, which are monitored daily to minimize risk.

Gain for Islamic ETFsUK: Db x-trackers has acquired the distributing fund status for 63 exchange traded funds (ETFs) for 2008.

The Customs approval applies to Shariah compliant ETFs as well as Db x-trackers’ equity, commodity and foreign exchange.

This means the profi ts made on the disposal of the ETFs are considered as a capital gain for UK individuals or a chargeable gain for UK corporates, according to the fi rm.

Individuals would incur the capital gains tax rate at 18% while UK corporates would incur corporation tax on the chargeable gain at a rate of up to 28%.

UK authorized investment funds and investment trusts would be exempted from tax on the chargeable gain.

Islamic fi nance links soughtFRANCE: Islamic fi nance is among the sectors in which France wants to have much stronger links with Malaysia, Malaysian

prime minister Najib Razak said after a four-day offi cial visit to France.

French fi nance minister Christine Lagarde meanwhile said that as Malaysia is a leader in Islamic fi nance, her country wants to learn more from it as it seeks to develop its own Islamic fi nance sector.

GLOBAL“Scholars may be held accountable”GLOBAL: Shariah advisors could be held liable if they make obvious mistakes in their decisions but having differing views is exempted, said International Shariah Research Academy executive director Mohammad Akram Laldin.

Declaring that Shariah advisors are not above the law and should be held accountable for lapses in their functions, he, however, said that since Islamic fi nance and Shariah law relate to views and opinions, if a matter concerns differing views and interpretations, then it would be diffi cult to fault the scholar.

He stressed that Shariah advisers should only rule on how products should be structured and banks ought to carry out audits to ensure correct implementation.

Growing attractionGLOBAL: Sukuk issues are expected from non-traditional markets such as South Korea, Singapore, Thailand and the UK as the global economy recovers, said market watchers.

Most bankers have been wary about prospects of a sharp rebound but there are projections for issuances from markets outside the traditional Islamic banking centers of the Middle East and Malaysia.

According to RHB Investment Bank’s investment banking head Rafi dz Rasiddi, Sukuk has become popular among the foreigners.

“It will continue to be an asset class which will be regarded seriously, instead of as a fad with a short lifespan, as laws and regulations are being developed to cater for these issuances,” he added.

National mortgage fi rm Cagamas CEO Steven Choy said improving investor sentiment would drive the market as the improving economy is creating the need for fi nancing.

He regarded the Sukuk market as a good avenue to raise money as it appeals to both conventional and Islamic investors.

MIDDLE EASTTie-up to push Sukuk market in the GCCUAE: The Dubai International Financial Centre (DIFC) is working together with the Multilateral Investment Guarantee Agency, a member of the World Bank Group, on an initiative to assist in the development of the region’s bond and Sukuk market.

DIFC said the cooperation also includes promoting foreign direct investment into the Middle East and North Africa region.

DIFC Authority CEO Abdulla Al Awar said: “By leveraging on DIFC’s knowledge of the regional markets and MIGA’s experience in working closely with emerging markets, the initiative will help create cost-effi cient, cross-border fi nancial structures which are critical for facilitating investments.”

He contended that the risk perception of the region, and particularly of the GCC, is reducing rapidly with the abatement of the global fi nancial crisis, pointing out that despite the fi nancial crisis, there have been a couple of successful bond issues, indicating a continuing appetite.

Mortgage for house buyersUAE: Shariah fi nance company Reem Finance has partnered property developer Hydra Properties to extend its Islamic

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mortgage fi nance to all properties within the Hydra Village development, under which Hydra would pay mortgage interest for its customers on projects that were delayed by more than six months.

It said the move is aimed at the “timely completion” of Hydra Village, its fl agship US$545 million development due for completion in 2011.

“Reem Finance is targeting UAE nationals and expatriate residents and the scheme is expected to be in high demand,” said CEO Nicholas Lehman.

The mortgage offered to eligible applicants is up to 80% fi nance between seven and 15 years and a debt service ratio of 60%, while its interest rates will depend on the mortgage specifi cs.

Hydra Properties CEO Ali Bin Sulayem said: “Mortgage fi nance is becoming more common in the UAE, where the majority of properties are still bought for cash.

It is one way people can leverage their economic purchasing power and buy a property in Abu Dhabi with a mortgage is now often less expensive than renting.”

“Inadequate provisions by banks”UAE: Have the emirates’ banks set aside suffi cient provisions for loan losses, especially in the property sector? Experts fear not, says a report.

Moody’s Investor Service head of GCC banking team Mardig Haladjian sees the banks increasing more aggressively the current 2.5% loan loss provisions to total loans given the deterioration of the economy, particularly in the property sector.

According to the central bank, UAE bank loans stood at AED1 trillion (US$272.29 billion), for which only AED26.3 billion has been set aside for non-performing loans and only AED8.8 billion for “general provisions” that include funds earmarked for loans to the troubled Saudi conglomerates Saad and Ahmad Hamad Al Gosaibi Brothers.

“Provisions are just too low compared to the total loans in the system,” said Yazan Abdeen, fund manager at ING Investment Management. “They should come up to have

higher provisions in the third and fourth quarters.”

“There will be fi nancial distress with corporates and family-owned businesses. This issue has been a bit overlooked in the public sphere,” said Michael von Uffelen, director and restructuring specialist at Arqaam Capital. According to some analysts, the percentage of non-performing loans could rise to 5%-10%, notably in credit cards and unsecured loans.

Bank: No oilfi eld investment in IranQATAR: Qatar National Bank (QNB) has denied claims that it plans to invest in or fi nance the development of the Esfandiar oilfi eld in Iran.

QNB, which has an Islamic banking window, said this after the Iranian oil ministry’s website quoted a senior offi cial as saying that the fi nancial institution would invest EUR400 million (US$581.4 million). QNB has a representative offi ce in Tehran.

Production from the oil fi elds of Esfandiar, which is an extension of the Lulu fi eld in the Saudi-Kuwait Neutral Zone and shared by Iran and Saudi Arabia, has decreased in recent years.

Blooming wellUAE: National Bank of Abu Dhabi (NBAD), Abu Dhabi Commercial Bank (ADCB) and Abu Dhabi Islamic Bank (ADIB) have signed a fi nancial agreement with Abu Dhabi-based developer Bloom Properties to offer up to 25-year fi nancing for residential properties in its fl agship development, Bloom Gardens.

The three banks will offer up to 80% fi nancing with as low as 10% upfront equity prior to bank fi nancing. Bloom Properties CEO Hani Shammah said the agreement facilitates the company’s efforts to provide customized fi nancing solutions for clients.

No need for loansSAUDI ARABIA: Finance minister Ibrahim Alassaf has ruled out any issuance of sovereign Sukuk or conventional bonds as he sees no need for them, rejecting the contention of some analysts who feel such issuances will help grow the Saudi market for these instruments.

While analysts conceded that there is no need for the nation to borrow as it has large reserves, they argued that with no sovereign bond or Sukuk to set a benchmark, secondary bond trading has been lackluster since the market’s launch in June.

The trading platform is meant to provide companies with alternative sources of funding to keep infrastructure projects running as the top oil exporter has earmarked more than US$400 billion for such projects in its state budget.

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Malaysian fi rm takes stake in Fajr CapitalUAE: The Malaysian government’s investment Khazanah Nasional is taking a 25% stake, amounting to US$150 million, in Dubai-based Islamic investment fi rm Fajr Capital. It thus joins forces with its Brunei counterpart, Brunei Investment Agency, to help drive a combined Asian-Gulf drive to globalize Islamic fi nance.

The acquisition was completed with the conclusion of Fajr Capital’s fi rst round of funding with commitments amounting to US$588 million, said Khazanah’s managing director Azman Mokhtar, who also saw the move as providing cross linkages between Malaysia and key Muslim markets.

Besides the Brunei organization, other Fajr Capital shareholders include MASIC, a member of the Al-Subeaei Group of Saudi Arabia, and the Abu Dhabi Investment Council.

Fajr Capital focuses on providing Shariah compliant fi nancial services and complementary opportunities in the broader economy in major Muslim regions.

Meanwhile, Fajr Capital said it has launched a new Islamic investment fi rm with an initial capital of US$600 million to focus on fi nancial services and complementary opportunities in the Shariah compliant market.

It said that with its headquarters in the Dubai International Financial Centre and offi ces in Kuala Lumpur and London, it offers regional connectivity, cross-market insights, and co-investment opportunities.

(Also see IFN Report on page 15)continued...



The kingdom used to depend on local borrowing to fi nance budget defi cits when oil prices were weak in the late 1990s.

Banking system upgradeBAHRAIN: Kuwait Finance House–Bahrain (KFH-Bahrain) has appointed International Turnkey Systems, a computer group, to provide an integrated IT solution known as the “Ethical Banking” solution under a one-year contract to support the bank’s expansion plans.

The contract includes upgrading the bank’s core banking system, integrating the branch automation system, Islamic fi nance, trade fi nance, internet banking, human resources and treasury.

New kid on the blockBAHRAIN: Tadhamon Capital, the latest Islamic investment company in the country, is banking on private equity as one of its key drivers, focusing on providing expansion capital to companies in sectors such as agribusiness, manufacturing, marine, healthcare, education and services.

After obtaining a category 1 investment company license from the Central Bank of Bahrain, it started operations in the last quarter of 2008.

Tadhamon Capital is a wholly owned subsidiary of Tadhamon International Islamic Bank, the largest bank in Yemen, which is in turn majority owned by Yemeni conglomerate Hayel Saeed Anam & Co Group, with Qatar Islamic Bank also as a prominent shareholder.

Focusing initially on the management of existing assets of its shareholders, the company, to be offi cially launched later this month, will also manage new investments and products through its asset management, private equity, real estate, treasury and wealth management divisions, Tadhamon Capital said.

Ijarah hits the race tracksUAE: Emirates Islamic Bank (EIB) has signed a AED100 million (US$27.2 million) Ijarah fi nancing facility with property developer Meydan Group to fund the further development of the Falcon Car Park.

The adjoining Meydan Grandstand and Racecourse will host the Dubai World Cup for horse racing in March 2010.

Meydan chairman Saeed Al-Tayer described the Shariah compliant facility, the fi rst such for the company, as a beginning for future Islamic facility tie-ups and an opportunity to showcase Dubai as a fi nancial, sporting and investment hub.

Conquering the skiesUAE: With local investors coming back to the market, Islamic fi nancing will become an important element in the aircraft industry in the Middle East, according to Boeing’s managing director for the Middle East and African region, John Matthews.

The aircraft manufacturer, with US$6.5 billion worth of aircraft fi nancing globally, expects the aircraft fi nancing requirements of Middle Eastern airlines such as Emirates, Etihad and Qatar Airways to be “substantial”, which would lead to more local banks to participate in the transactions.

Matthews said this is due to the fact that aircraft are ideal for Islamic fi nancing institutions as they are longer term, global and fl exible assets.

However, he added, there is still a large pool of potential, untapped capital in this region which can be reached by working with local fi nanciers.

He cited the example of Noor Islamic Bank, which handled two Boeing 777 transactions for Emirates and Etihad, as an indication that the market is picking up.

Islamic bank offers brokerage serviceUAE: Ajman Bank, the emirate’s fi rst Islamic commercial bank, has signed an agreement with Al Safwa Islamic Financial Services to provide brokerage services to the bank’s customers.

They will be able to buy and sell on a real time basis Shariah compliant shares listed on the Dubai Financial Market and Abu Dhabi Financial Market through Al Safwa.

Ajman Bank said the live share brokerage makes it easier for customers to participate in the Emirate’s fi nancial markets and will encourage more people to invest in the

country’s economy through a community banking approach.

Islamic fi nancing to buy Mercedes-Benz vehiclesUAE: Automotive group Daimler’s fi nancial services arm is to provide Shariah compliant fi nancing to purchase passenger and commercial vehicles in the UAE in a move to step up Mercedes-Benz sales throughout the Middle East.

Daimler Financial Services has formed a joint venture with Abu Dhabi-based Al Fahim Group and Dubai-based Mercedes distributor Gargash Enterprises.

This sees the formation of two companies, for region-wide fi nancing and leasing, that will provide private and business customers with options to buy or lease new or pre-owned Mercedes-Benz vehicles from a single source.

Daimler Financial Services said it has set a goal of more than EUR300 million (US$440 million) worth of business in the UAE in three to fi ve years. It is represented in over 40 countries and fi nances one third of all vehicles produced by Daimler worldwide.

Progress trackingBAHRAIN: Bahrain Financial Exchange (BFX) has set up product development working groups (PDWG) for Islamic and conventional asset classes as part of its strategy to ensure that its products meet the needs of its users whilst adding value.

BFX, the fi rst multi-asset exchange in the Middle East and North Africa, said that PDWG conventional and PDWG Islamic were also part of a process to ensure that the exchange remains market driven.

BFX director Arshad Khan said that PDWGs’ primary function was to provide input, guidance and feedback on the requirements of market participants in the development and suitability of the products.

The PDWG Islamic comprises Unicorn Investment Bank head of listed securities Marco Mauri, Elaf Bank general manager Helmi Rashid, Khaleeji Commercial Bank offi cial Hussam Saif and Bahraini Saudi Bank head of risk management Anjum Shahzad.

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www.islamicfi nancenews.comTAKAFUL NEWS


ASIABancaTakaful venturePAKISTAN: Standard Chartered Bank Pakistan (SCBP), the largest international bank in the country has signed a strategic cooperation agreement with Pak-Qatar Family Takaful (PQFT), Pakistan’s fi rst and largest family Takaful operator, and FWU AG, a global facilitator of bancaTakaful.

The agreement will lay the foundation for Standard Chartered to launch Pakistan’s fi rst Shariah compliant bancassurance products.

These products will provide long-term savings plans designed to meet future fi nancial needs. In addition, the Takaful cover will offer fi nancial protection to families when the breadwinner dies.

New market for Swiss ReMALAYSIA: Switzerland-based global reinsurer Swiss Re has obtained a license from Bank Negara Malaysia to write re-Takaful business and open a re-Takaful operation in Kuala Lumpur. The composite license allows it to offer family and general re-Takaful solutions to Takaful clients worldwide.

The head of its re-Takaful operation, Marcel Omar Papp, said the license will enable it to consolidate and enlarge the scope of its efforts by also providing general re-Takaful solutions, apart from the family re-Takaful it has been offering in the Middle East for the past three years.

Rebranding moveMALAYSIA: Syarikat Takaful Malaysia is to spend RM115 million (US$34 million) on rebranding to grow its domestic market share to 50%.

It said this will include modernizing its logo, physical creative refurbishments of its 13 top-tier branches and refreshed outdoor billboards and branch signages.

EUROPEGrowing businessUK: Salaam Halal, the UK’s only standalone Islamic insurer, will expand next year to offer Takaful to Muslim-owned small- and medium-sized businesses. Launched in 2008 and providing car and home insurance, it is tar-geting the two million Muslims living in the UK.

Chief executive Bradley Brandon-Cross said the fi rm will be focusing on businessmen with less than GBP1 million (US$1.6 million) annual turnover, typically lawyers, accountants, doctors and retailers.

Salaam Halal is also considering offering life savings products in partnership with other insurers in the UK and plans to move into European countries with large Muslim populations, such as France, Germany and the Netherlands.

MIDDLE EASTt’azur to operate in QFCQATAR: Bahrain-based Takaful operator t’azur has become the fi rst Islamic general insurance company to undertake general Takaful business in the Qatar Financial Centre (QFC).

Its range of Takaful products includes property, engineering, marine, medical and motor. According to the International Monetary Fund, Qatar is set to be the fastest growing economy in the world, and t’azur chairman Abdulaziz Bin Naif Al Orayer sees the country becoming an important market for Islamic insurance and in need for innovative insurance solutions.

Ajman Bank to offer Salama productsUAE: Ajman Bank has signed an agreement with Salama Islamic Arab Insurance Company— the largest global Takaful and re-Takaful group in the country— to offer Family Takaful solutions for individuals and families.

Under the deal, Ajman Bank will offer Takaful products in addition to Salama’s existing auto fi nance and home fi nance facilities.


www.islamicfi nancenews.comRATING NEWS

ASIALimited depth and breadth

MALAYSIA: Fitch Ratings has affi rmed the Insurer Financial Strength (IFS) rating of HSBC Amanah

Takaful (Malaysia) (HSBCAT) at ‘A-’ with a stable outlook. It views HSBC Amanah as an important member of HSBC Holdings (‘AA’/Negative) and its rating is underpinned by the group’s ability and willingness to provide ongoing support.

The Takaful fi rm, it noted, benefi ts tremen-dously from its parent’s well-recognized brand name, product and distribution capabilities, as well as other management resources. The rating also refl ects the company’s healthy capitalization, conservative investment mix and prudent management.

However, the constraining factors are HSB-CAT’s limited track record, modest size, pos-sible execution risks of its operating plan, as well as the competitive and evolving nature of the overall Takaful operating environment. Additionally, the Takaful operator is chal-lenged to manage its expenses in balance with business growth.

CIMB maintains its brawnMALAYSIA: Capital Intelligence (CI) has affi rmed CIMB Bank’s foreign currency ratings

at ‘BBB+’ long-term and ‘A2’ short-term, refl ecting the bank’s government ownership and systemic importance, while the fi nancial strength rating is maintained at ‘BBB’.

The bank’s reasonably good core profi tability and liquidity ratios and its satisfactory capital adequacy underpin the fi nancial strength rating. Asset quality ratios weakened this year but improving profi tability ratios will enable the bank to make higher provisions if required. The outlook for all the ratings is stable, CI said.

The bank reported lower earnings last year due to a sharp fall in investment trading profi ts as well as losses from overseas operations. The profi tability of the bank’s core operations improved partly due to better operating cost effi ciencies and the growth in Islamic banking income through its Islamic unit CIMB Islamic Bank.

Both the non-performing loans (NPLs) to gross loans and the provision coverage

ratios worsened at end June 2009. This was partly due to the consolidation of the Thai acquisition, Bank Thai, after it became a subsidiary this year. NPL classifi cations also increased in the domestic business, refl ecting the weakened credit environment in the country.

‘AAA’ for water operatorMALAYSIA: RAM Ratings has assigned preliminary long-term rating of ‘AAA’ with a stable outlook and a short-term rating of ‘P1’ to Pengurusan

Air SPV’s proposed Islamic medium term notes program of up to RM20 billion (US$5.8 billion) and proposed Islamic commercial papers program of up to RM20 billion.

Pengurusan Air SPV was set up by Pengurusan Aset Air Berhad (PAAB) to undertake the fi nancing of the latter’s acquisition of water assets and their accompanying liabilities in Peninsular Malaysia and Labuan. The SPV will also be responsible for the subsequent development of state water operators’ infrastructure. Its income will be solely derived from the Ijarah rental payable by PAAB, which will be used to service the company’s debt obligations.

RAM Ratings said the ratings refl ected the strategic importance of PAAB’s role as the asset owner of water infrastructure in Peninsular Malaysia and Labuan, in line with the restructuring of the water industry. PAAB is fully owned by the Minister of Finance Inc. Given the strategic nature of water infrastructure, RAM Ratings believes that support from the government will be forthcoming if and when required.

Ratings revisedJAPAN: Following their weakened performance in their fi nancial years ended March 2009, RAM Ratings has revised the ratings of two Japanese banks while affi rming another. All three banks have Islamic fi nance activities.

The rating for Bank of Tokyo-Mitsubishi UFJ (BTMU) has been revised to ‘AA1/Stable/P1’ from ‘AAA/-/P1/Rating Watch (Negative), Sumitomo Mitsui Banking Corporation (SMBC) to ‘AA1/Stable/P1’ from ‘AAA/-/P1/Rating Watch (Negative) and Mizuho Corporate Bank (MCB) to ‘AA1/Stable/P1’ from ‘AA1/Stable/P1’. SMBC has a branch in the Dubai International Financial Center that deals with Islamic business transactions,

while BTMU and MCB are observer members of the Islamic Financial Services Board.

Entrenched footingSINGAPORE: RAM Ratings has reaffi rmed DBS Bank’s long- and short-term fi nancial institution ratings

at ‘AAA’ and ‘P1’, respectively, with a stable outlook, refl ecting the bank’s entrenched footing in its domestic market and its high level of systemic importance as Singapore’s top retail deposit-taker.

Amid the challenging economic climate, DBS Bank’s gross and net non-performing loan (NPL) ratios rose to 2.84% and 2.02%, respectively, as at end-June 2009 (end-December 2008: 1.53% and 0.86%). The slip in asset-quality indicators had been caused by NPLs from the shipping sector and also the bank’s loan exposure to Middle Eastern entities. RAM believes that additional provisions may be required for the Middle Eastern NPLs.

RAM also anticipates that DBS Bank will remain profi table in the fi nancial year December 2009 despite the rising NPLs. It felt that the challenges faced by DBS Bank are balanced by its solid overall and Tier-1 risk-weighted capital-adequacy ratios of 16.17% and 12.55%, respectively, as at end-June 2009, which are well above those of similarly rated banks in RAM Ratings’ universe. DBS Bank owns 60% of Islamic Bank of Asia, the fi rst Islamic bank in Singapore.

Positive note for BRIINDONESIA: Fitch Ratings has assigned a rating of ‘AA+(idn)’ to Bank Rakyat Indonesia’s (BRI) proposed fi ve- and 10-year subordinated bond of up to

IDR3 trillion (US$317 million). BRI is majority-owned by the Indonesian government and has an Islamic unit, BRI Syariah.

Fitch has also affi rmed BRI’s long-term foreign currency issuer default rating (IDR) at ‘BB’ with a stable outlook, short-term foreign currency IDR at ‘B’, national long-term rating at ‘AAA(idn) with a stable outlook, individual rating at ‘C/D’, support rating at ‘3’ and support rating fl oor at ‘BB-’.

According to Fitch, this refl ects BRI’s strong underlying profi tability which should continue

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www.islamicfi nancenews.comRATING NEWS

to provide a strong buffer against the effects of more challenging economic conditions.BRI’s ratings also took into account its majority state ownership and size.

RAM reaffi rms PLSA SukukMALAYSIA: RAM Ratings has reaffi rmed the respective ‘A1’ and ‘A3’ ratings of Project Lintasan

Shah Alam’s (PLSA) RM330 million (US$97 million) Sukuk Ijarah (Senior Sukuk) (2008/2027) and RM415 million (US$122 million) Sukuk Mudarabah (Junior Sukuk) (2008/2037), with a stable outlook.

PLSA is the concessionaire for the 14.7 km Lebuhraya Kemuning-Shah Alam (LKSA) toll highway in Selangor state, which is under construction and slated for completion by the end of this year.

EUROPEInsurer’s outlook negative

LUXEMBOURG: Fitch Ratings has assigned life insurer Atlanticlux Lebensversicherung an insurer fi nancial strength (IFS) rating of ‘BBB’ and a long-term issuer

default rating (IDR) of ‘BBB-’, both with a negative outlook.

The ratings refl ect Atlanticlux’s strong capitalization which has so far been unaffected by the current fi nancial market crisis.

Unlike many other life insurers, Atlanticlux has reported robust operating earnings in 2008. It also has an adequate liquidity position as the funding of its new business costs is by sister company FWU Provisions-Factoring, resolving potential liquidity strains.

The negative outlook refl ects Fitch’s view that the diffi cult conditions in global fi nancial markets will continue to persist. Hence, Atlanticlux is still vulnerable to a reduction in demand for unit-linked insurance policies as well as a reduction in the volume of assets under management.

FWU Group, an independent fi nancial service provider that also offers Takaful products, has a 74.9% stake in Atlanticlux while the rest is owned by VHV, a medium sized German insurance group.

MIDDLE EASTFitch affi rms BKME

KUWAIT: Fitch Ratings has affi rmed the Bank of Kuwait & the Middle East’s (BKME) long-term issuer default

rating (IDR) at ‘A-’ with a stable outlook. It also ratifi ed the bank’s short-term IDR of ‘F2’, individual rating of ‘C’ and support rating of ‘1’. The support rating fl oor is affi rmed at ‘A-’.

It said BKME’s IDRs and support rating refl ect the extremely high probability of support from the Kuwaiti authorities, in case of need. The bank’s Individual Rating refl ects adequate, albeit deteriorating, asset quality and profi tability, but also its relatively small franchise and the impact of the slowdown in Kuwait’s economic growth on BKME’s future prospects.

TDIC Sukuk gets ‘AA’UAE: Fitch Ratings has assigned TDIC Sukuk’s US$1.45 billion program an expected ‘AA’ rating. It has been formed by the Tourism Development and

Investment Company (TDIC) to issue trust certifi cates under the program.

The expected rating for the program is in line with TDIC’s senior unsecured rating of ‘AA’. TDIC’s long-term issuer default rating (IDR) is ‘AA’ with a stable outlook and short-term IDR ‘F1+’.

Under the program, which follows a grant and leaseback of rights to use and develop certain land parcels on Saadiyat Island (the Sukuk assets), TDIC Sukuk will issue trust certifi cates representing benefi cial interest in the land. The proceeds will be used to pay TDIC for granting the rights to develop the Sukuk assets. TDIC Sukuk will then lease the Sukuk assets to TDIC for rental payments.

‘AA-’ for HBMEUAE: Fitch Ratings has assigned a long-term rating of ‘AA-’ to HSBC Bank Middle East (HBME)’s US$5 billion trust certifi cate issuance program,

which includes its senior unsecured trust certifi cates. HBME possesses a long-term Issuer Default rating (IDR) of ‘AA-’ with a negative outlook, a short-term IDR of ‘F1+’, an individual rating of ‘B’ and a support rating of ‘1’.

The rating refl ects the obligations of HBME— with respect to the trust certifi cates— to be considered as unconditional, unsubordinated obligations of the bank; ranking pari passu with its other senior unsecured obligations.

Sovereign saviorUAE: Capital Intelligence (CI) has affi rmed Abu Dhabi Commercial Bank’s (ADCB) foreign currency

ratings at ‘AA-’ long-term and ‘A1’ short-term with a stable outlook based on the majority shareholding by the Abu Dhabi government as well as the bank’s systemic importance given its large size and signifi cant domestic presence.

The fi nancial strength rating is maintained at ‘A’, but the outlook is negative in view of the deteriorating profi tability and asset quality as well as continuing tight liquidity.

Earnings are likely to come under further pressure owing to increased provision charges for loans and investments, including provisions on exposures to two large Saudi business groups, Saad and Algosaibi, which are experiencing fi nancial diffi culties.

Rakbank well capitalizedUAE: National Bank of Ras Al Khaimah’s (Rakbank) long- and short-term foreign currency ratings have been

affi rmed at ‘A-/A2’ by Capital Intelligence, underpinned by the high likelihood of support from the UAE authorities in case of need. The fi nancial strength rating is maintained at ‘BBB+’ due to the Islamic bank’s good management and sound overall fi nancials. All ratings carry a stable outlook.

Liquidity ratios tightened last year although there was a slight easing of key ratios at end June 2009. Its customer deposit growth rate was higher than the system average in the fi rst half of this year, owing to aggressive deposit-gathering activities.

While the portfolio is performing well at present owing to the bank’s tough credit acceptance criteria, non-performing loans have risen in recent months due to the challenging operating environment and could rise further over the next few quarters. However Rakbank’s good operating profi tability and favorable capital profi le should enable it to provide aggressively should the need arise.

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www.islamicfi nancenews.comIFN REPORTS


Indonesia is scheduled to begin its fi rst Sukuk auction for the local market next week. In making the announcement this week, the Finance Department said the auction is expected to raise IDR1.5 trillion (US$158 million) to fi nance some of the government spending in this year’s budget.

It also said that the bonds will be offered in different prices and the auction will be open to both individual and institutional bidders. However, all bidding will have to be made through registered and authorized participants.

Sukuk issuances are set to become a regular occurrence in Indonesia, predicts HSBC Amanah Indonesia head Mahmoud Abushamma in an interview with Islamic Finance news. “You are going to seeing more issuances per structure, more retail and auction Sukuk.

“It took a long time for the fi rst issuance to come about but the government is now racing ahead to make it a regular process, and one way of ensuring this is to standardize the issuance structure itself,” he said.

He said domestic market players are continuously surprised by the uptake of the Islamic government paper. “With the fi rst retail issuance, we were expecting US$100 million but the subscription rose to about US$500 million.

The same thing occurred with the sovereign issue; we were expecting a smaller demand but we got US$4.7 billion,” he noted.

Abushamma added that the domestic Islamic industry has yet to reach saturation point in terms of the appetite for Islamic government paper.

“There is huge room to absorb more. They haven’t really had their fi ll yet and even if you look at the conventional investors, they are also interested to take a piece of this pie.

“For a country that had never issued a Sukuk before to have issued three of them within a relatively short period, and with the fourth due next week, this is a great accomplishment in itself, unbelievable almost. So you have four different issuance methods within a year. One can visualize the momentum that will push it forward,” he said.

Asked why an auction is being used, Abushamma explained the Sukuk auction is akin to bond auctions, which is not novel to the conventional market.

He said the government wanted to mimic the conventional issuance so that 90% of the process could be standardized, with a difference of only about 10% between the Sukuk and conventional bond processes.

“The government is therefore saving on costs and making the process easier,” he added.

The success of a Sukuk issuance has always been measured by the number of times it has been oversubscribed. However, such a determinant would be absent in a Sukuk auction.

Abushamma justifi ed this by saying that one should not use the oversubscription value of an issuance as a yardstick for success. Rather, it should be the number of issuances per year and value per issuance, he felt.

“If the fi nance ministry decides to hold seven or eight Sukuk auctions per year, this will be proof that there is a demand which the ministry is meeting. If, for example, there are seven conventional and Islamic issuances next year, I would deem that very successful,” he said.

Abushamma’s only reservation is a scenario where the ministry runs out of assets to allocate for Sukuk issuance.

“The ministry is doing everything it can to have suffi cient assets but in Islamic fi nance, if an asset is allocated, then it will be locked for the duration of the Sukuk and cannot be used for a second issuance.

That, in effect, would lock up assets for a long period of time, so the ministry would have to constantly come up with more assets to facilitate the issuances,” he said, adding that the ministry would then be compelled to follow through with conventional bond auctions.

Would the profi t rate be competitive to the interest rates of conventional bonds? Abushamma answered in the positive, as he felt the ministry would not want to create a dual benchmark.

He added that the margin of the conventional bond would be determined by several factors including the cycle or time of the year, the liquidity and the state of the market, among others.

Abushamma was confi dent that there is a positive perception among investors as there are still some who had previously never had access to Islamic government papers.

“A lot of the Islamic institutions, which cannot participate in the conventional paper, are willing to be more aggressive in this auction because they have not had enough of the previous issuances.

“There is still demand in the market, let alone from the big local banks. The local banks are looking to develop their Islamic units so that they, too, can participate in the bonds,” he said.

The 13th October will possibly be a signifi cant date for the Islamic fi nance industry, particularly in Indonesia, as it would set the stage for the growth of the Sukuk sector.

“I think the market is going in the right direction and next year will be an exciting time for Indonesia,” Abushamma concluded.

By Raphael Wong

INDONESIASukuk Going Once, Going Twice … Sold!

www.islamicfi nancenews.comIFN REPORTS


A new investment fi rm has been launched in the Islamic industry. What sets it apart is the fact that three of the shareholders are prominent sovereign investment bodies. Khazanah Nasional from Malaysia has invested US$150 million or 25% of the total US$600 million initial capital. The other two are the Brunei Investment Authority (BIA) and Abu Dhabi Investment Council (ADIC).

Another signifi cant matter is that the management team leading Fajr Capital comprises some of the most experienced fi nancial services practitioners.

All this, as chief executive Iqbal Khan explained to Islamic Finance news, is an elaborate plan to work on its strategy and optimize performance with best in class products, services, standards, technologies and primarily, the Shariah expertise.

“Our customers will be offered differentiated fi nancial services and experience and we hope that it will be a shift from consumption and debt to savings and investment,” he said, adding that in the current climate, out borrowing and outspending was not the solution out of the economic crisis.

Khan clarifi ed that while Fajr Capital is a new company, it had been around earlier, “in the sense that it was a project company then. We are now bringing the team together, as well as the investors, and working on our strategy,” he said.

On having sovereign investment organizations as its investors, Khan pointed out that the convergence of these investors was not deliberate. “We did not design it to be this way but this is how it turned out. We have a very healthy combination of east and west Asia, both from the sovereigns and the private sector,” he said.

On whether having the sovereign investment bodies on board meant that doors to investment opportunities would open more readily in those countries, Khan said: “For any company, connectivity matters but a relationship only entitles you to an audience.

“You get business when you add value. We are very fortunate that we have the relationship. Many of us who have been in the industry are well known to the regulators, market players and governments. We have a big responsibility to add value to the economies of the countries that we operate in.”

Khan also said that the mandate given to it by the investors was to establish an Islamic investment company that would prioritize and focus on the areas of its strength as a fi rm and the areas of opportunity. “Our focus will be on the markets we understand — the Muslim markets in Asia and the MENA region,” he explained.

Khan was confi dent that Fajr Capital has a very unique business model which it would use to compete with world class investment fi rms for assets while the companies which it would invest in would likewise compete with leading fi rms in their sectors.

On talk that Fajr Capital would be acquiring a majority stake in an Islamic fi nancial institution in Malaysia, Khan said that being a regulated business, he cannot confi rm or deny this.

He however said: “We would be privileged and delighted to work in Malaysia as and when the opportunity presents itself so that we can add value. We are actively looking”.

By Raphael Wong

UAECrème de la crème

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www.islamicfi nancenews.comCOUNTRY REPORT


The globalization and modernization of Islamic fi nance is seeing it growing in non-Muslim countries as well. A good example: the Islamic Financial Services Board (IFSB) regularly holds seminars in non-Islamic economies in East Asian. In January 2007, a seminar was held in Tokyo, in January 2008 it was in Hong Kong, and Korea was the venue in January 2009.

A similar picture emerges in the breakdown of IFSB members by countries. Japan is ranked 8th with seven members, Singapore has three, and there are two members from Hong Kong. Japan is worthy of particular focus in view of its tiny Muslim population and small scale activities in Islamic fi nance.

In Japan, there are only around 10,000 Muslims in a population of 127.3 million, unlike other fi nancial centers like the UK with two million out of 61 million and Singapore with 15% of the population. This means there is little demand for Islamic retail banking and investment products within Japan.

Also, Japan has no strong ties with Middle Eastern banks. There is no branch of banks from the Middle East in Japan; only Doha Bank has a representative offi ce in Tokyo. Likewise, Japanese banks are not very active in the Middle Eastern region unlike UK and other European banks because Japanese banks tend to mainly target only Japanese customers in overseas markets.

The economic relationship that Japan has with the region is chiefl y in importing petroleum, an “oil-only relationship”. This means Japanese fi nanciers don’t feel obliged to cater to the local demand in the region, including the need for Islamic products from local Muslim institutions and individuals.

In this sense, Islamic fi nance may be something diffi cult for the Japanese people to accept and use. Basically, Islam itself is not familiar in the nation. This is partly due to the fact that the Japanese do not communicate well with the rest of the world because of language (not many Japanese speak English well) and other cultural barriers, including its unique business conduct.

Hence, the people in Japan tend to regard Islamic fi nance as something mysterious. A common misunderstanding is that Islamic fi nance is only for Muslims. Some others feel that “interest-free” banking cannot be a viable business. When I made a presentation at a seminar, a member of the audience posed an interesting question: “Do Shariah scholars live in mosques, just as Buddhist monks live in temples?”

Besides this lack of basic understanding of Islamic fi nance and Islam itself, I assume that one of the reasons for meager Islamic fi nance activities among Japanese fi nancial institutions is that the Japanese people are too conservative and not good at embracing this new and growing business into the current fi nancial system. For them, Islamic fi nance is also not acceptable because of the differences in Shariah interpretation.

I believe, however, that this is basically not a big problem. Those with only fragmentary knowledge tend to convey wrong information. Also, many people are put off by the differences in the spelling of technical

terms, such as Musharakah, Musharaka, Musyaraka. They feel that such differences should have been standardized and made uniform to remove any ambiguity.

History and recent developments in the private sectorStill, there are some Japanese institutions which have gained experience in handling Islamic transactions. In the 1970s, Japanese banks and general trading companies raised funds in an Islamic manner, using the Bai Inah concept, through trading oil, gold and other commodities, mainly out of London. In late the 1990s, Japanese asset managers sold Islamic investment funds to Middle Eastern investors. Nomura Asset Management sold the Al Nukhba Asia Equity Fund. DIAM, the then Daiichi-life IBJ Asset Management, offered the Middle Eastern Fund for Japanese equities.

In Takaful, Japan has a very good example. Tokio Marine, the nation’s top insurance provider, launched its Takaful business in Saudi Arabia. Likewise in Indonesia in 2004, and it established a re-Takaful fi rm in Singapore. In 2006, Tokio Marine entered the Malaysian market as a joint venture with a local fi nancial group. In 2008 it obtained a license from the Egyptian authorities.

Recently, there were some Japanese Sukuk issuers. Aeon Credit Services (Malaysia) was the forerunner, followed by Toyota Capital Malaysia and Orix Leasing (Pakistan). There are expected to be more issuers in the future, depending on market conditions.

Legal changesThe development of Islamic fi nance in Japan will be enhanced by regulatory support. In December 2008, the Financial Services Agency (FSA) amended the ordinance for the enforcement of the Banking Act. Bank subsidiaries are now allowed to offer Islamic fi nancing. These transactions of course require authorization by Shariah scholars.

The reason why Islamic fi nancing was considered to be permissible for Japanese banks was that Islamic transactions, based on Murabahah and Ijarah for example, involve asset/commodity trading, which is not allowed for banks under the Banking Act. The amendment mentioned above enables a banking group to offer Islamic transactions only through its subsidiaries.

Backed by this legal change, two large Japanese banks have established Islamic banking units. Sumitomo Mitsui Banking Corporation launched its Islamic business in London, the local entity being SMBC Europe. Also, Bank of Tokyo-Mitsubishi UFJ Malaysia has started an Islamic unit.

Further challengesTo conclude, these are some of my ideas for the improvement of the Islamic fi nance business in Japan.

Banks should be able to offer Islamic servicesDespite the legislative change mentioned above, I believe this is far from enough. One of the fears of the FSA is over the segregation of risk, because some Islamic transactions involve holding assets. However,

The Development of Islamic Finance in JapanBy Etsuaki Yoshida

continued...

www.islamicfi nancenews.comCOUNTRY REPORT


The Development of Islamic Finance in Japan (continued)

if we look at the examples in many Islamic and western countries, having both conventional and Islamic banking assets in a bank does not create a big issue in risk management.

Tax and accounting treatment should be done immediatelyAt the moment, there are not many Islamic transactions in Japan, and many are wondering about tax and accounting issues from the very fi rst step: how are Sukuk going to be treated under the Japanese accounting standard, what type of fi nancial products should Sukuk be categorized as, and how much should they be taxed?

It may be a chicken and egg question, but if the authorities and professionals can sort out such instances, this will lead to more Islamic transactions in the country.

There should be legal clarifi cation about SukukOne of the fastest growing areas in Islamic fi nance is Sukuk. Unfortunately, potential issuers and investors, and even lawyers, are confused about Sukuk transactions due to its structural nature, and there is no offi cial treatment by the authority. The biggest issue is whether they should be treated as bonds or other fi nancial products such as asset-backed securities (ABS) and trust benefi ciaries.

I am not saying that Sukuk should be treated as bonds, nor as ABS. To treat each Sukuk according to its nature is one idea. What is required is an offi cial stand on how each party can undertake Sukuk transactions. Some investors are concerned whether the coupons they hold for Islamic products would be treated as interest rate income due, while at the same time it is not ABS because the credit rating is on the corporation’s credibility, not the asset’s probability to repay.

This point is critical as Sukuk comprises a large component of modern Islamic fi nance, especially for non-Muslim nations like Japan, assuming that the focus is mainly on wholesale business.

Total Full Associate Observer Total Full Associate Associate

Malaysia 27 2 3 22 Hong Kong 2 1 1

UAE 24 1 3 20 Lebanon 2 1 1

Sudan 16 1 1 14 Palestine 2 1 1

Bahrain 16 1 15 South Africa 2 2

Kuwait 14 1 13 US 2 2

Saudi Arabia 10 2 1 7 UK 2 2

Qatar 9 1 1 1 Djibouti 1 1

Japan 7 7 Indonesia 1 1

Int’l Org. 5 1 4 Syria 1 1

Pakistan 4 1 1 2 China 1 1

Jordan 4 1 3 Mauritius 1 1

Brunei 3 1 2 Philippines 1 1

Egypt 3 1 2 Canada 1 1

Iran 3 1 2 Germany 1 1

Singapore 3 1 2 Korea 1 1

Turkey 3 3 Morocco 1 1

Maldives 2 1 1 Senegal 1 1

Bangladesh 2 1 1 TOTAL 178 21 21 136

Source: IFSB *As of November 2008 **Shaded countries are non-members of the Organization of the Islamic Conference.

Etsuaki YoshidaDeputy head, Africa & Middle EastJapan Bank for International CooperationandVisiting associate professorWaseda UniversityEmail: [email protected]

Global experts have warned that the push to clear over-the-counter (OTC) derivatives through central counterparties (CCPs) could become a new form of risk in the fi nancial system. Will CCP risk become a threat to the Islamic

fi nance industry? What are the safeguards needed?

If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300words to Christina Morgan, Forum Editor, at: [email protected] before Wednesday, 14th October 2009.

Next Forum Question

www.islamicfi nancenews.comMARKET REPORT


Several criticisms have been raised regarding the practices of Islamic fi nancial institutions (IFIs). While Muslim critics view Islamic fi nancial products as caricatures of conventional products, non-Muslims fi nd it diffi cult to comprehend what real value proposition Shariah compliant products offer over conventional products. For example, Islamic fi nance has remained passive up to now on the international debate on environmental issues and socially responsible investing (SRI).

Although these issues are very much “Islamic”, they remain absent from the investment agenda of IFIs. Some industry observers have been calling for the development of a new generation of products that would give authenticity to Islamic banking practices by promoting these investment facets.

This article discusses SRI and Shariah compliancy, delineating how a dual strategy will improve the perception of Islamic fi nancial products and services to the West. Such a strategy will no doubt also give comfort to industry observers that Shariah “based” products such as those which promote social and moral justice are possible to engineer, and can be successfully promoted in both the East and West.

SRI is an investment strategy that seeks to maximize both fi nancial returns and the social good of investors. Typically, an SRI fund would invest in companies whose products and policies are consistent with the investor’s ethical and moral values. Its historical roots can be traced to the Religious Society of Friends (Quakers) in 1758, when the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade. The founder of Methodism, John Wesley (1703-1791), emphasized responsible investing in his sermon “The Use of Money”, calling on people to refrain from harmful business practices and avoid investments in industries that could be harmful to the health of workers.

The modern SRI movement evolved from the political climate of the 1960s, and has been gathering momentum ever since. In the 1960s, the late Dr Martin Luther King, leader of the African American civil rights movement, started economic development projects like the Montgomery Bus Boycott and Operation Breadbasket in Chicago, which established the model for future SRI efforts. The “Pax World Fund” was established in 1971 to invest in those companies that did not profi t from the Vietnam War.

From the 1970s up to the early 1990s, both individual and institutional investors avoided doing business in South Africa due to concerns about its racist apartheid system. While these efforts alone may not have brought an end to apartheid, it did put pressure on the South African business community to abolish the unjust and immoral practices taking place in their country. Since the late 1990s, sustainable environmental development has increasingly defi ned SRI, as it seeks to disengage from those businesses and investments that pose a threat to the environment.

The added feature of SRI funds is the “positive screening” criteria used to select companies to invest in. These funds proactively look

to support companies that supply the “basic necessities” of life, and provide products and services that are of long-term benefi t to the community.

Positive attributes that SRI funds seek in companies include:

• A sound record on conservation of energy and natural resources.

• Protection of the environment.• Good customer relationship.• Fair employment.• Strong community involvement.• An equal opportunity policy.• Transparency in its activities.

This feature is currently absent in the Islamic screening methodology.

The Shariah screening methodology in Islamic funds carries many of the hallmarks of negative screening in SRI funds. They share a list of prohibited industry sectors. For example, both Islamic funds and SRI funds aim to avoid companies that are involved in the manufacture and sale of weapons, trade with oppressive regimes, are involved in tobacco or alcohol production, gambling, pornography, offensive or misleading advertising.

These are often referred to as “sin” stocks, and are the fi rst to be screened out from a stock universe. The Shariah compliancy sphere also requires companies to adhere to certain fi nancial ratios such as interest income, gearing and accounts receivable.

However, this Shariah screening methodology at present is largely reactive, disinvesting when companies breach certain fi nancial screens or alternate the nature of their business. It should strive to achieve more than merely what is compulsory, and proactively seek to engage with companies in order to change their policies and objectives to conform to universally accepted social, moral and environmental agendas.

This is in keeping with the teachings of Islam, which Imam Shatibi encapsulated in the “Maqasid Al-Shariah” (the higher objectives of Shariah), which seeks to protect one’s religion, life, intellect, wealth and progeny. This would also fall under the Quranic defi nition of man as vicegerent (God’s representative on Earth). Under this defi nition, he is invoked to use the resources of the planet to benefi t mankind while also caring for and replenishing the planet.

BMB Islamic, a UK-based fi nancial consultancy, has structured the world’s fi rst true Shariah compliant SRI fund. This product is likely to resonate well with the values and needs of all investors, Muslims and non Muslims alike.

Such a product has the potential to be commercially successful in line with similar products in the market. For example, when analyzing the performance of SRI assets between 2005 and 2007, we fi nd that they

Linking Shariah-Based Products and Socially Responsible Investing

By Mufti Talha Ahmad Azami

continued...

www.islamicfi nancenews.comMARKET REPORT


Linking Shariah-Based Products and Socially Responsible Investing (continued)

increased more than 18%, while non SRI funds in general increased less than 3%.

In the West, both the US and Europe have been booming markets for the trillion dollar SRI fund industry. According to the 2007 Social Investment Forum’s report on Socially Responsible Investing Trends in the US, assets in socially screened portfolios increased to US$2.71 trillion in 2007, from US$2.16 trillion in 2003. The European SRI market grew from GBP1 trillion (US$1.6 trillion) to GBP1.6 trillion (US$2.6 trillion) in 2007.

According to research estimates by fi nancial consultancy Celent, the SRI market will reach US$3 trillion in the US alone by 2011. The global size of the conventional SRI fund industry alone is estimated at US$5 trillion, whilst the global Islamic fi nancial industry with all its market segments and asset classes is liberally estimated at US$1 trillion.

Here, IFIs have the potential to attract a huge market share if they were to overlap their products with SRI features.

The advantage that Shariah compliant products have in the investment arena is that they have nothing inherently illicit that would put off conventional investors, yet the opposite is true for conventional products.

Hence, whilst the Islamic fi nancial industry seeks to expose its value proposition to the fi nancial world, an attractive route would be to leverage on the strength of the SRI industry, both in its fi nancial performance and its social and moral stance on society.

Mufti Talha Ahmad AzamiAssociate Shariah managerBMB Islamic

The Islamic Finance news roadshow aims to explore the Islamic financial market developments in Bruneiand to tap the valuable potential which has yet to emerge.

Our distinguished speakers and panelists include:Senior Vice President & Head of International

Business, RHB Islamic BankBusiness Development Director, Dow Jones AER Company Inc

Lecturer, Universiti Brunei DarussalamDirector, Centre for Islamic Banking,

Management & FinanceChief Financial Officer, Perbadanan Tabung

Amanah Islam BruneiPartner, Amiri Capital

Executive Director, Credit Agricole Asset Management Islamic Malaysia

Managing Partner, Mohamed Ridza & CoHead Sukuk & Alternative Investments,

AmIslamic Funds ManagementHead of Islamic Banking Asia Pacific, Citi

Senior Partner, Abrahams Davidson & CoDirector Emerging Markets and Islamic Investments,

Fischer Francis Trees & Watts, BNP Paribas Investment PartnersManaging Partner, Cheok Advicates & Solicitors

Executive Manager, The Withanage Group Incorporated

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“In the US, assets in socially screened portfolios increased to US$2.71 trillion in 2007, from US$2.16 trillion in 2003”

www.islamicfi nancenews.comFOCUS


Inherent in Islamic fi nance are the explicit elements that address several of the issues that have surfaced in the conventional fi nancial system during the current crisis. Given the global dimension of the crisis, the accelerated pace at which it has spread and the severity of its repercussions, there is a need for a higher degree of collective determination by the international community to work together towards developing a global strategy that will evolve a fi nancial system that is stable and sustainable over the entire business cycle.

As Islamic fi nance continues to become an integral part of the global fi nancial system, it will increasingly be exposed to risks of fi nancial stress arising from global fi nancial instability and global economic activity. This necessitates a greater global engagement between those that are driving the reform agenda, given that this t will result in new structures, standards and regulatory regimes for the industry.

This is particularly important when such standards become the basis on which assessments are made by multilateral agencies, rating agencies and the market at large. Such engagement also facilitates cooperation and collaboration in achieving our shared interest of preserving global fi nancial stability.

The combination of indiscriminate lending, excessive risk-taking and overzealous fi nancial innovation was at the root of the current fi nancial crisis. The fi nancial turmoil that originated in the mortgage market in a number of the advanced economies triggered a broad-based meltdown and subsequent breakdown in the functioning of the fi nancial markets.

Despite these developments, the Islamic fi nancial industry has been able to weather this fi rst wave of the global fi nancial crisis, demonstrating its robustness as a stable form of fi nancial intermediation. The resilience of the Islamic fi nancial institutions during this crisis epitomizes the intrinsic strengths embedded in Islamic fi nance that are underpinned by the Shariah principles.

This arises from two essential requirements of Islamic fi nance. One is that the fi nancial transaction must be accompanied by an underlying productive economic activity that will generate legitimate income and wealth, thereby establishing a close link between the fi nancial transactions and productive fl ows.

Thus, in the Islamic fi nance business model, fi nancing or equity participation can only be extended to activities in the real sector that have economic values. Hence, Islamic fi nancial assets are expected to grow in tandem with the growth of underlying economic activities.

The other is that it is based on profi t sharing in which there is mutual risk sharing. Islamic fi nance, therefore, impels the Islamic fi nancial institutions to undertake the appropriate due diligence on the viability of business proposals and thereby enforce the requirement for transparency and disclosure.

The role of the Shariah board, in ensuring that all aspects of the business operation of Islamic fi nancial institutions are in accordance with the Shariah principles, adds another level of oversight which inherently safeguards against irresponsible practices.

Embraced in its entirety, these in-built dimensions of governance and risk management contribute to safeguarding Islamic fi nance from the potential risks of fi nancial stress arising from excessive leverage or speculative activities.

Despite the uncertainties and challenging environment posed by the current crisis, the development of the Islamic fi nancial services industry within the global fi nancial system has continued unabated.

The dynamic nature of the Islamic fi nancial system is refl ected by its solid growth, the increased range of fi nancial products and services and the establishment of new Islamic fi nancial service providers from different parts of the world including from the non-Muslim world.

This increased participation is particularly pronounced in the Sukuk market where funds have been raised by issuers from various parts of the world. Recent Sukuk issuances both in domestic and in foreign currency have attracted interest from a wide investor base from Asia, Europe and the Middle East. These positive developments have been achieved despite the more challenging global fi nancial market environment.

As Islamic fi nance evolves to meet the changing requirements of businesses and consumers, innovation is integral to the development of new Islamic fi nancial products and services. It is also recognized, however, that unfettered fi nancial innovation can become a major source of instability in the fi nancial system.

In Islamic fi nance, fi nancial innovation must be tested against the “Maqasid al-Shariah” (objectives of the Shariah), where the primary objective is the realization of benefi t to the people. This demands the internalization of Shariah principles in Islamic fi nancial transactions, both in form and substance.

Indeed, the move to embrace Shariah-based innovation brings with it a strong Shariah compliant culture in Islamic fi nancial institutions. This in turn serves to ensure that the product development process in Islamic fi nance is grounded within Shariah injunctions which also incorporate ethical value propositions.

Financial innovation also needs to be supported by robust risk management and strong governance practices. It is recognized that sophisticated and complex fi nancial structures very often result in the failure of consumers, investors and even regulators to understand the risks and leverages embedded in the instruments, which in turn results in the lack of transparency and inadequate risk management.

In Islamic fi nance, a prerequisite under the risk-sharing arrangements is having the necessary information to understand the risks that are to be borne by Islamic fi nancial institutions.

The explicit risk sharing element between the fi nancier and customer in Islamic fi nance obligates its participants to evaluate the risk profi le of the product or investment proposition, the underlying trends in earnings and cash fl ows, and its income-producing potential. This process also allows the pricing of funds to be adjusted accordingly.

Islamic Finance and Global Financial StabilityBy Zeti Akhtar Aziz

continued...

www.islamicfi nancenews.comFOCUS


Islamic Finance and Global Financial Stability (continued)

Equally important is the risk management capability of the Islamic fi nancial institution to manage the risks that are peculiar to Islamic fi nancial transactions. For example, additional capital is required to cushion the inventory risks of underlying assets and equity positions that are embedded in partnership contracts, hence bringing the capital requirements closer to the true economic risks in portfolio of the fi nancial institutions.

To manage depositors’ expectations and sustaining market confi dence, Islamic banks are also permitted to set aside a portion of income derived from assets funded under Mudarabah contracts, in the form of profi t equalization reserves (PER), as a mechanism to address the impact of pro-cyclicality of their returns.

This is reinforced by a combination of stronger governance and enhanced transparency to address the trust-based relationships which is a fundamental hallmark of Islamic fi nance.

With increased globalization and greater integration of Islamic fi nance with the international fi nancial system, the higher will be the risk of the contagion effects from other markets and jurisdictions. In addition, Islamic fi nance will also be affected by the second round effects arising from slower economic growth and the reduction in global liquidity.

An essential infrastructure in this environment is a well functioning liquidity management infrastructure to enhance the capacity of Islamic fi nancial institutions to effectively manage their liquidity positions. Of importance is the wide availability of Shariah-based Islamic fi nancial market instruments to facilitate liquidity management. Such facilities for adjusting portfolio balances in a Shariah compliant manner ensure that the liquidity risks can be effectively managed.

As part of the global collaborative efforts to enhance the effi ciency of Islamic fi nancial institutions in managing liquidity at both national and across borders, a Liquidity Management Task Force was established by the IFSB (Islamic Financial Services Board) and the IDB (Islamic Development Bank) early this year.

Integral to the efforts in the development of Islamic fi nance has been the strengthening of the regulatory and supervisory framework for Islamic fi nance. While the basic legal, regulatory and supervisory framework that takes into account the distinctive features of Islamic fi nance are already in place, there is a need to have a more comprehensive infrastructure to meet the present challenges.

Looking beyond the current crisis, there needs to be an integrated crisis management framework as part of this infrastructure to ensure that any emerging crisis in the Islamic fi nancial system will be promptly and effi ciently managed.

Moving forward, in the aftermath of this global fi nancial crisis there is also a need to have in place the institutional arrangements for the resolution of troubled international Islamic fi nancial institutions. There is a need to have in place a mechanism for cooperation between regulators across jurisdictions for the resolution of, and containing, potential systemic risks beyond the national boundaries.

To promote global fi nancial stability in the Islamic fi nancial system, the Taskforce on Islamic Finance and Global Financial Stability was established in 2008 by the IDB in collaboration with the IFSB, together

with the participation of industry leaders and international experts, to examine the development of further building blocks in the Islamic fi nancial infrastructure to strengthen its resilience and ability to meet future challenges.

Substantive progress has been achieved by the Taskforce and a report, including major recommendations, is planned for submission to the IFSB Council this November.

The areas covered by the report include the effective implementation and enforcement of prudential standards, the supervisory framework, strengthening of the fi nancial safety net mechanisms and the development of an effective crisis management and resolution framework.

Among the recommendations will be the establishment of a Financial Stability Forum to address this issue in the Islamic fi nancial system.

The internationalization of Islamic fi nance requires the industry to progress into the next stage of international acceptance, with mutual recognition of fi nancial standards and products across jurisdictions. Indeed, in the area of Shariah, there has already been progressive convergence of Shariah views and rulings, and the mutual recognition of fi nancial standards and products across jurisdictions.

As this continues to occur, it would become a major driver towards greater convergence and harmonization. This has been facilitated through greater engagement among the regulators, practitioners and scholars in Islamic fi nance across jurisdictions. This interface is important given the common interest of global fi nancial stability.

The announcements following the recent G20 Summit and the associated announcements of the Financial Stability Board refl ect the international economic regulatory cooperation that will set the agenda for the conventional standard setting bodies to put in place a framework to strengthen the international regulatory standards.

It will also form the basis for assessments that will be made by multilateral agencies such as the IMF (International Monetary Fund).

It is therefore important for there to be engagement with the prudential standard setting entities for Islamic fi nance, not only to raise awareness of whether the new standards being introduced can be applied to Islamic fi nance and whether modifi cations need to be made, but to also cope with possible consequences that are unintended.

Equally important is the need for recognition of the standards that have been issued for Islamic fi nance, specifi cally by the IFSB. As a growing component of the international fi nancial system, it becomes important for interface and engagement with the international standard setting entities to take place, given the common interests of global fi nancial stability.

This is an excerpt from the keynote address Bank Negara Malaysia governor Zeti Akhtar Aziz delivered at the Seminar on Islamic Finance: During and After the Global Financial Crisis, jointly organized by the World Bank, the Islamic Financial Services Board, the Islamic Development Bank and the Institute of International Finance, in Istanbul, Turkey, this week.

www.islamicfi nancenews.comMEET THE HEAD


Islamic Finance news talks to leading players in the industry

Could you provide a brief journey of how you arrived where you are today?

As a lawyer, I started in New York at a major securitization practice, back when this word conjured the leading edge of technical fi nance rather than fraudulent fi nancial alchemy. I was fortunate to work in New York and later London with the leading securitization practices and arguably the index securitization lawyer in each place.

I fi rst came to Asia in 1999 and later joined Allen & Overy in 2001. My practice became much broader than securitization in scope but still focused on capital markets. At university in the US, I had found early Islamic history fascinating, which led me to read in Islamic law purely for interest. I hardly expected that in a few years international fi nance would witness a revitalization of and intersection with Islamic commercial law. But that is what has been happening, and in 2002 I found myself working on the Malaysian and Qatari sovereign Sukuk, drafting the original set of cross-border Sukuk contracts.

Islamic fi nance weaves together my interest in Islamic law and history, my inclination towards structured and technical deals, and the excitement and possibilities of working during the foundational period of a major development in fi nance. I wouldn’t have guessed these things could coexist, but here we are.

What does your role involve?I have a broad capital markets practice which in addition to Islamic fi nance includes debt, equity, securitization and US securities work. In Islamic fi nance, I look after our practice in East Asia, handling some of the deals myself. Because the modern incarnation of Islamic fi nance is still in its early years, a fair bit of my time in that area is spent working with bankers, borrowers, governments and various domestic counsel in considering what’s possible.

What is your greatest achievement to date?Well, in absolute and not just professional terms, it would be convincing my wife to marry me, and then, fi ttingly, orchestrating a conventional and a Shariah compliant marriage. Notwithstanding the general view that Islamic transactions are harder to do, I can report to you that while the Islamic marriage was a walk in the park, the conventional one was fraught with legal complexities and multi-jurisdictional maneuvers (it did not help that we decided to do it in Mexico on a weekend on the

last day of the year with the entire judiciary on vacation and our papers without the preferred amount of sealing wax).

What are the strengths of your business?Allen & Overy’s greatest strength is perhaps a pervasive attitude running throughout the organization of focusing on clients and holding their interests paramount. Everything else fl ows from that. There are of course other indispensable strengths — deep presence in major business and fi nancial centers, top quality people who generally enjoy working together and have a distinct common culture — but it is the client focus which takes the potential of the other strengths and turns them into something distinct and valued.

What are the factors contributing to the success of your company?

Client focus, geographical reach, the best people, a shared culture. Beyond those, a major external factor is the fi rm’s reputation, which of course is owed to a record of great client service. People view us as being able to handle the most diffi cult and consequential of transactions and respond to a changing legal environment with timely, decisive advice.

What are the obstacles faced in running your business today?

I see challenges more than obstacles. In this time of change, a primary challenge is to stay relevant and valuable when the clients, markets and products are all changing. At the same time, effi ciency and cost containment are at the forefront of clients’ minds, and we must respond. So we must navigate all these changes while becoming more effi cient. That’s quite testing.

Where do you see the Islamic fi nance industry in, say, the next fi ve years or so?

I see familiarity with Islamic fi nance growing among conventional fi nance professionals, moving us towards better assimilation of the concepts and tools of Islamic fi nance within fi nance generally. Not long ago securitization or credit derivatives were specialties familiar only to a relative few.

They are now fairly well integrated into the mainstream of fi nance (people will differ on the merits of this!) and many bankers, lawyers, etc are conversant with them. I also see greater predictability developing in Islamic fi nance as old deals sour in the current environment and questions and documents are litigated (and hence clarifi ed). Finally, I see a more sophisticated understanding developing of the interaction between Islamic and conventional deals.

Name one thing you would like to see change in the world of Islamic fi nance.

It would be nice to see a more balanced view of the two strands that create the fabric of Islamic fi nance: Islamic law and modern fi nance. Participants often see too much from one perspective and too little from the other. Modern fi nance, which has developed around basic secular law principles, is being married to a very different system of rules. This is not a simple process, and simplistic views don’t serve the cause.

Name:

Position:

Company:

Based:

Age:

Nationality:

Hooman Sabeti-Rahmati

Counsel

Allen & Overy

Singapore

43

Iranian

www.islamicfi nancenews.comTERMSHEET


ISSUER CIMB Islamic Bank

FACILITY DESCRIPTION The Tier 2 Junior Sukuk issued under the Junior Sukuk Program

ISSUE SIZE The Junior Sukuk Program shall have a limit of RM2 billion (US$581 million) in nominal value

PROGRAM TENOR Twenty-two years from the date of fi rst issuance

TENOR OF THE JUNIOR SUKUK ISSUE

From fi ve to 15 years as the issuer may select, provided that the Junior Sukuk matures prior to the maturity date of the Junior Sukuk Program

PURPOSE OF ISSUANCE

For the Islamic banking operations of CIMB Islamic or any other Shariah compliant use, as approved by the Shariah advisor

ISSUANCE DATE 25th September 2009

PRINCIPAL ADVISOR/LEAD ARRANGER

CIMB Investment Bank

LEAD MANAGER CIMB Investment Bank and/or such other party or parties that may be appointed by the issuer

CENTRAL DEPOSITORY & PAYING AGENT

Bank Negara Malaysia

FACILITY AGENT CIMB Investment Bank

TRUSTEE Malaysian Trustees

SOLICITORS Zaid Ibrahim & Co

SHARIAH ADVISORS CIMB Investment Bank (backed by the CIMB Islamic Shariah committee)

RATING The Junior Sukuk Program is given an indicative rating of ‘AAIS’ by the Malaysian Rating Corporation

ISLAMIC PRINCIPLE USED

Each issue of Junior Sukuk will be based on (but not limited to) the Shariah principle of Musharakah

CIMB Islamic’s Tier 2Junior Sukuk Program

For more termsheets, visit www.islamicfinancenews.com

www.islamicfi nancenews.comMOVES


AVIVAAUSTRALIA: Insurance group Aviva’s CEO, Allan Griffi ths, will leave the company at the end of the year, following completion of the acquisition of the company by National Australia Bank (NAB) on the 1st October. He will work with the integration design team to provide advice and guidance over the next couple of months.

Griffi ths joined Aviva in January 2001 as managing director of the company’s life business and was promoted to chief executive in April 2003. He has held directorships on Aviva Australia’s boards, was chairman of Aviva Investors and was also a director of CIMB Aviva Takaful and CIMB Aviva Assurance in Malaysia.

PRUBSNMALAYSIA: Prudential BSN Takaful COO Azim Mithani has been appointed the company’s new CEO, pending Bank Negara Malaysia approval. Azim succeeds Mohamad Salihud-din Ahmad, who left three months ago for insurer Great Eastern Holdings to head its future Islamic insurance operations.

INVESTMENT DARKUWAIT: The Investment Dar, half-owner of luxury car maker Aston Martin Lagonda, has appointed Mike Grant as its chief restructuring offi cer to assist in its ongoing debt restructuring. A partner at London-based Aaronite Partners, he brings 20 years of specialist turnaround consultancy practice. He is reputed to have led some of the largest and most complex restricting projects in the UK.

Grant’s appointment comes as Investment Dar announced late last month that it has agreed with its lenders to suspend their claims while it looks to restructure its debts. In April, Investment Dar had defaulted on a payment on a US$100 million Sukuk.

BARCLAYSINDIA: Barclays Bank has appointed Suvrat Saigal as director of consumer banking, global retail and commercial banking for India. His expertise includes consumer banking across a wide range of global markets.

Prior to Barclays, Saigal held various senior positions at Citigroup for 19 years across Australia, the Asia-Pacifi c region including

Japan, US, Singapore and India with focus on the consumer banking segment.

He was most recently the head of strategy, marketing and customer experience at Citibank Australia.

HSBCMALAYSIA: HSBC Bank Malaysia has appointed Mukhtar Hussain as deputy chairman and CEO, pending regulatory and board approvals. He succeeds Irene M Dorner who will become president and CEO of HSBC Bank US in early 2010.

Dorner has been in Malaysia since May 2007 and was instrumental in the launch of HSBC Amanah, the Islamic fi nancial services division of HSBC, in the country.

Having joined the HSBC group in 1982, Mukhtar has held a number of senior management positions in London and the Middle East. He is global CEO of HSBC Amanah and recently was CEO of global banking and markets in the Middle East and North Africa.

In his new position, Mukhtar will be based in Kuala Lumpur and will retain his role as global CEO of HSBC Amanah.

CREDIT SUISSEUS: Credit Suisse Group has hired Paul Germain, who co-headed Goldman Sach’s highly profi table unit that loans money and securities to US hedge funds, to head its prime brokerage unit.

He will join Credit Suisse in early 2010 and oversee the Swiss bank’s worldwide sales of prime brokerage products ranging from equities and exchange-traded futures to fi xed income and currencies.

Germain who became a Goldman partner in October 2008, left Goldman’s last week as US co-head of its global securities services which includes US prime brokerage.

BARCLAYSSINGAPORE/INDIA: Barclays wealth management division has appointed Srinivas Siripurapu as managing director and head of Southeast Asia and South Asia as well as market manager of the South Asian community. He has 25 years experience in investment and private banking in India and

across Asia, and will assume his new role in November 2009.

Siripurapu will be responsible for developing the business and managing the Asia-based private banking teams covering the two regions. As market manager, he will lead in developing the business and managing the private banking teams in the South Asian community which covers Dubai, Geneva, Hong Kong, London and Singapore.

Most recently, he was managing director and country team head for India International Asia at UBS Singapore, responsible for a large team of bankers servicing South Asian clients, based out of Hong Kong and Singapore.

Meanwhile, Barclays wealth management unit in India has appointed the former vice-president of Deutsche Bank’s private wealth management, Anil Kumar Nahar, as its director. He has 12 years experience in the fi nancial services industry.

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www.islamicfi nancenews.comDEAL TRACKER


Mr Daud Abdullah (David Vicary)Chairman, Global Islamic Finance Group

Deloitte

Dr Mohd Daud BakarChief Executive Offi cer

International Institute of Islamic Finance

Prof Dr Mohd Masum BillahChairman

Middle Eastern Business World

Dr Humayon DarChief Executive Offi cer

BMB Islamic

Mr Badlisyah Abdul GhaniChief Executive Offi cer

CIMB Islamic

Ms Baljeet Kaur GrewalManaging Director/Vice Chairman

Head, Global ResearchKFH Research Limited

Mr Sohail JafferPartner

International Business Development FWU International

Dr Monzer Kahf Consultant/Trainer/Lecturer

Private Practice

Mr Mohamed Ridza AbdullahManaging Partner

Mohamed Ridza & Co

Prof Bala ShanmugamDirector of Banking & Finance Monash University Malaysia

Mr Muhammad Nejatullah SiddiqiAuthor, Scholar, Speaker, Trainer

Mr Rushdi SiddiquiHead of Islamic Finance

Thomson Reuters

Mr Dawood TaylorRegional Senior Executive-Middle East

Prudential PLC

Mr Abdulkader ThomasPresident & CEO

SHAPE – Financial Corp

Mr Paul WoutersPartnerBener

Prof Rodney WilsonDirector of Postgraduate Studies

Durham University

Mr Sohail ZubairiChief Executive Offi cer

Dar Al Sharia Legal & Financial Consultancy

Another Islamic Finance news exclusive

ISSUER SIZE (million) INSTRUMENT

Sime Darby US$1.3 billion Islamic MTN

Republic of Indonesia US$1 billion Global Sukuk

France US$1.5 billion Sukuk

Dubai Department of Finance

US$10 billion Sukuk

Sakana Holistic Housing Solutions

US$50 Sukuk

Dar-Al Dhabi Holding US$346.4 Sukuk

Unicorn Investment Bank US$425 Sukuk Ijarah

Tourism Development and Investment Company

TBA Sukuk

Islamic Bank of Thailand US$1.4 billion Sukuk

HSBC TBA Sukuk

Majlis Bandaraya Melaka Bersejarah

US$27.63 Sukuk

Qatar Gas Transport Company

Up to US$500 Sukuk

Cagamas US$1.1 billion Sukuk

Bank Negara Indonesia US$50 Sukuk

Japan Bank for International Cooperation

US$200 TBA

Agni US$71 Sukuk

City Development US$708.32 Sukuk

Malaysian Debt Ventures Up to US$449.07 Sukuk

Bumiputra-Commerce Holdings

US$572.18 Sukuk

Islamic Bank of Thailand US$178.77 Ijarah

ETA Star Property Developers

Up to US$150 Sukuk

Abu Dhabi Commercial Bank US$1.07 billion Islamic MTN

Metrodata US$10,703.00 Ijarah

First Fidelity US$2.9 Diminishing Musharakah

Prolintas US$187US$93.5 million senior Ijarah, US$93.5 million junior Musharakah

Qatar Islamic Bank US$300 Sukuk

Barwa Real Estate US$800 Sukuk

Tabreed Up to US$500 Sukuk

For more details and the full list of deals visit

www.islamicfi nancenews.com

Deal trackerKeeping you abreast of the world’s upcoming Shariah compliant deals

Islamic Finance newsAdvisory Board:

www.islamicfi nancenews.comISLAMIC FUNDS TABLES


DisclaimerCopyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its affi liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and fi tness for any purpose.

Contact EurekahedgeTo list your fund or update your fund information: [email protected]

For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Monthly returns for Emerging Markets funds (as of the 7th October 2009)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 ETFS Physical Palladium ETFS Metal Securities 12.85 Jersey

2 Oasis Crescent Global Property Equity Oasis Global Management Company (Ireland) 12.02 Ireland

3 Al Rajhi International Small Capitalisation Merrill Lynch Investment Managers 9.52 Saudi Arabia

4 ETFS Physical Silver ETFS Metal Securities 6.63 Jersey

5 Global Equity Trading - Al-Manal Samba 6.46 Saudi Arabia

6 SWIP Islamic Global Equity - Class A Scottish Widows Investment Partnership 5.88 UK

7 AlAhli Small Cap Trading Equity The National Commercial Bank 5.30 Saudi Arabia

8 DWS Noor Precious Metals Securities - Class A DWS Noor Islamic Funds 4.75 Ireland

9 ETFS Physical Platinum ETFS Metal Securities 4.58 Jersey

10 ETFS Physical PM Basket ETFS Metal Securities 4.14 Jersey

Eurekahedge Global Islamic Fund Index* 1.81

Eurekahedge Global Islamic Fund Index

Monthly returns for Developed Markets funds (as of the 7th October 2009)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE

1 ETFS Physical Palladium ETFS Metal Securities 12.85 Jersey

2 Atlas Islamic Atlas Asset Management 12.18 Pakistan

3 Oasis Crescent Global Property Equity Oasis Global Management Company (Ireland) 12.02 Ireland

4 Atlas Pension Islamic Fund - Equity Sub Atlas Asset Management 11.59 Pakistan

5 Al Meezan Mutual Al Meezan Investment Management 10.83 Pakistan

6 Meezan Islamic Al Meezan Investment Management 10.67 Pakistan

7 UTP-Islamic JS Investments 10.19 Pakistan

8 Al Rajhi International Small Capitalisation Merrill Lynch Investment Managers 9.52 Saudi Arabia

9 Alfalah GHP Islamic Alfalah GHP Investment Management 8.94 Pakistan

10 Mawarid Industrial and Petroleum Services Fund National Investments Company 8.64 Kuwait

Eurekahedge Islamic Fund Index* 1.40

60

70

80

90

100

110

120

12/31

/99

7/1/00

1/1/01

7/1/01

1/1/02

7/1/02

1/1/03

7/1/03

1/1/04

7/1/04

1/1/05

7/1/05

1/1/06

7/1/06

1/1/07

7/1/07

1/1/08

7/1/08

1/1/09

7/1/09


SHARIAH INDEXES


The S&P Shariah Indices. Creating opportunity for Islamic investors.To learn more, contact [email protected].

S&P Shariah Indices Price Index Levels

7/10/09 Aug-09 July-09 June-09 May-09 Apr-09Sep-0980

190

300

410

520

630

740

850

960

1070

1180

S&P 500 ShariahS&P Europe 350 Shariah S&P Japan 500 Shariah

0

120

240

360

480

600

720

840

960

1080

1200S&P Global Property ShariahS&P Global Infrastructure Shariah


Index Code Index Name 7/10/09 Sep-09 Aug-09 July-09 June-09 May-09 Apr-09

SPSHX S&P 500 Shariah 944.996 945.321 913.542 899.016 842.797 836.573 799.755

SPSHEU S&P Europe 350 Shariah 1127.743 1134.881 1095.741 1058.270 977.823 995.630 894.958

SPSHJU S&P Japan 500 Shariah 964.310 994.367 996.042 959.584 908.760 878.263 826.363


SPSHAS S&P Pan Asia Shariah 905.612 916.579 846.106 867.704 780.340 797.647 708.922

SPSHG S&P GCC Composite Shariah 738.751 725.528 688.379 669.202 654.208 671.614 599.648

SPSHPA S&P Pan Arab Shariah 125.772 123.831 118.463 115.322 112.643 113.860 102.133

SPSHBR S&P BRIC Shariah 1094.263 1066.062 973.014 996.242 924.814 978.497 807.592


SPSHGU S&P Global Property Shariah 657.468 655.839 625.881 641.907 592.683 586.922 506.477

SPSHIF S&P Global Infrastructure Shariah 96.289 96.587 82.238 80.488 75.034 75.918 66.983

50

170

290

410

530

650

770

890

1010

1130

1250S&P Pan Asia ShariahS&P GCC CompositeS&P Pan Arab ShariahS&P BRIC Shariah


www.islamicfi nancenews.comSHARIAH INDEXES


Sumeet Nihalani Senior Director SalesMiddle EastTel: +971 4364 [email protected]

Anthony YeungRegional Director Hong Kong, China, Philippines, Taiwan, Korea, Japan, Australia & New ZealandTel: +852 2831 2580 [email protected]

Ariff SultanBusiness Development DirectorMalaysia, Singapore, Indonesia, India, Thailand, Pakistan, Sri Lanka & BangladeshTel: +65 6415 4262 [email protected]

For more information, please visit www.djislamicmarkets.com or contact

DESCRIPTIVE STATISTICS Market Capitalization (US$ billions) Component Weight (%)

IndexComponent

numberFull

Float adjusted

Mean Median Largest Smallest Large Small

DJIM World 2412 14822.89 11612.42 4.81 0.97 330.01 0.00 2.84 0.00

DJIM US 622 6487.28 6061.79 9.75 2.36 330.01 0.13 5.44 0.00

DJIM Titans 100 100 6512.35 5826.72 58.27 40.55 330.01 12.78 5.66 0.22

DJIM Asia/Pacifi c Titans 25 25 980.87 657.21 26.29 21.12 68.81 12.78 10.47 1.94

Mean, median, largest, smallest and component weights are based on fl oat adjusted market capitalization, not full market capitalization.

Data as of the 7th October 2009

INDEX PRICE RETURN (%)

1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World -0.2 -0.98 -1.28 1.60 13.81 28.95 14.89 25.29

DJIM US -0.1 -0.27 -1.05 1.67 11.23 21.65 9.83 17.63

PERFORMANCE OF DJ INDEXES

INDEX PRICE RETURN (%)


DJIM Titans 100 -0.47 -1.31 -1.57 0.42 10.01 23.17 7.34 13.19

DJIM Asia/Pacifi c Titans 25 -3.03 -3.79 -2.92 -0.21 14.73 30.11 17.31 25.82

PERFORMANCE OF DJ TITANS INDEXES

PRIC

E R

ETU

RN

(%)

PRIC

E R

ETU

RN

(%)

DJIM Titans 100 DJIM Asia/Pacif ic Titans 25

DJIM World DJIM US

-5

0

5

10

15

20

25

30

35


-10

-5

0

5

10

15

20

25

30

35

www.islamicfi nancenews.comISLAMIC LEAGUE TABLES


For all enquires regarding the above information, please contact: Jennifer Cheung (Media Relations) Email: [email protected] Phone: +852 2804 1223

TOP ISSUERS OF ISLAMIC BONDS OCT 2008 – OCT 2009

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Saudi Electricity Saudi Arabia Sukuk 1,867 1 14.5 HSBC, Samba Financial Group

2 Petronas Global Sukuk Malaysia Ijarah Islamic 1,498 1 11.7 Morgan Stanley, CIMB, Citigroup

3Terengganu Investment Authority

MalaysiaMurabahah Islamic bond

1,422 1 11.1 AmInvestment

4 Islamic Development Bank Saudi Arabia Sukuk Wakalah 850 1 6.6 BNP Paribas, CIMB, Deutsche Bank, HSBC

5 Kingdom of Bahrain Bahrain Sukuk Ijarah 750 1 5.8 Deutsche Bank, HSBC, Calyon

6 Republic of Indonesia Indonesia Sukuk Ijarah 650 1 5.1Standard Chartered, HSBC, Barclays Capital, (Persero) Danareksa, Trimegah Securities, Bank Mandiri

7 Khazanah Nasional Malaysia Sukuk Musharakah 601 3 4.7CIMB, AmInvestment, Maybank Investment Bank

8 Cagamas Malaysia Murabahah MTN 589 4 4.6Standard Chartered, AmInvestment, Maybank Investment Bank, HSBC, CIMB, RHB Capital

9 Syarikat Prasarana Negara Malaysia Ijarah MTN 573 1 4.5 CIMB, Maybank Investment Bank

10 Danga Capital Malaysia Sukuk Musharakah 444 1 3.5 CIMB, AmInvestment

11 Islamic Republic of Pakistan Pakistan Sukuk 441 3 3.4Standard Chartered, Dubai Islamic Bank Pakistan

12 Penerbangan Malaysia Malaysia Murabahah MTN 411 1 3.2 HSBC, CIMB, AmInvestment

13 MISC Malaysia Murabahah MTN 368 2 2.9 HSBC, CIMB, AmInvestment

14 Seafi eld Capital Malaysia Sukuk Musharakah 269 1 2.1 CIMB

15 Saudi Hollandi Bank Saudi Arabia Sukuk 207 1 1.6 Saudi Hollandi Bank

16Dar Arkan Real Estate Development Company

Saudi Arabia Sukuk Ijarah 200 1 1.6 HSBC, Samba Financial Group

17 Projek Lintasan Shah Alam Malaysia Murabahah MTN 174 4 1.4 RHB Capital

18 PLUS SPV Malaysia Sukuk Musharakah 151 1 1.2 BIMB Holdings, CIMB

19Jimah Energy Ventures Holdings

Malaysia Istisna MTN 149 2 1.2AmMerchant Bank, Bank Muamalat Malaysia, RHB Investment Bank, MIMB Investment Bank

20 UMW Holdings Malaysia Musharakah MTN 141 1 1.1 Maybank Investment Bank

Total 12,849 64 100.0



ARE YOUR DEALS LISTED HERE?

Jennifer Cheung (Media Relations)Email: [email protected]

Telephone: +852 2804 1223

If you feel that the information within these tables is inaccurate, youmay contact the following directly:

TOP ISSUERS OF ISLAMIC BONDS JULY 2009 – OCT 2009

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Petronas Global Sukuk Malaysia Sukuk Ijarah 1,498 1 36.63 Morgan Stanley, CIMB, Citigroup

2 Islamic Development Bank Saudi Arabia Sukuk Wakalah 850 1 20.78BNP Paribas, CIMB, Deutsche Bank, HSBC

3 Syarikat Prasarana Negara Malaysia Ijarah MTN 573 1 14.00 CIMB, Maybank Investment Bank

4 MISC Malaysia Murabahah MTN 368 2 9.00 HSBC, CIMB, AmInvestment

5 Khazanah Nasional Malaysia Sukuk Musharakah 214 1 5.23CIMB, AmInvestment, Maybank Investment Bank

6 Islamic Republic of Pakistan Pakistan Sukuk 174 1 4.26 Standard Chartered

7 UMW Holdings Malaysia Musharakah MTN 141 1 3.44 Maybank Investment Bank

8 Cagamas Malaysia Murabahah MTN 130 1 3.18 HSBC, CIMB, RHB Capital

9 CIMB Islamic Bank Malaysia Sukuk Musharakah 86 1 2.09 Maybank Investment Bank

10 Makro Utama Malaysia Sukuk Istisna 28 1 0.70 Kenanga Investment Bank

11 Tanjung Langsat Port Malaysia Sukuk Musharakah 11 1 0.28Malaysian Industrial Development Finance

12 Offshoreworks Capital Malaysia Musharakah MTN 11 1 0.27 MIDF Amanah Investment Bank

13 Serrisa Sinar Malaysia Murabahah MTN 3 1 0.07 MIDF Amanah Investment Bank

14 TSH Sukuk Ijarah Malaysia Sukuk Ijarah MTN 3 1 0.07 OSK Asia Securities

Total 4,090 15 100.00



For all enquires regarding the above information, please contact:

Jennifer Cheung (Media Relations)

Email: [email protected]: +852 2804 1223; Fax: +852 2529 4377

ISLAMIC BONDS BY CURRENCY JULY 2009 – OCT 2009

Amt US$ m Iss %

US dollar 2,348 2 57.4

Malaysian ringgit 1,567 12 38.3

Pakistan rupee 174 1 4.3

Total 4,090 15 100.0

ISLAMIC BONDS BY CURRENCY OCT 2008 – OCT 2009

Amt US$ m Iss %

Malaysian ringgit 6,275 50 48.8

US dollar 3,748 4 29.2

Saudi Arabian riyal 2,273 3 17.7

Pakistan rupee 441 3 3.4

Indonesian rupiah 112 4 0.9

Total 12,849 64 100.0

ISLAMIC BONDS OCT 2008 – OCT 2009

Manager or Group Amt US$ m Iss %

1 CIMB 2,871 27 22.3

2 HSBC 2,197 13 17.1

3 AmInvestment 2,047 10 15.9

4 Samba Financial Group 1,033 2 8.0

5 Maybank Investment Bank 717 11 5.6

5 Standard Chartered 622 7 4.8

7 Morgan Stanley 499 1 3.9

8 Citigroup 499 1 3.9

9 Deutsche Bank 463 2 3.6

10 RHB Capital 335 9 2.6

11 Calyon 250 1 2.0

12 Barclays Capital 217 1 1.7

13 BNP Paribas 213 1 1.7

14 Saudi Hollandi Bank 207 1 1.6

15 Dubai Islamic Bank Pakistan 133 2 1.0

16 BIMB Holdings 129 3 1.0

17Malaysian Industrial Development Finance

98 7 0.8

18 EON Bank 66 3 0.5

19 Oversea-Chinese Banking 55 1 0.4

20 Bank Muamalat Malaysia 37 2 0.3

Total 12,849 64 100.0

ISLAMIC BONDS BY COUNTRY OCT 2008 – OCT 2009

Amt US$ m Iss %

Malaysia 7,773 51 60.5

Saudi Arabia 3,123 4 24.3

Indonesia 762 5 5.9

Bahrain 750 1 5.8

Pakistan 441 3 3.4

Total 12,849 64 100.0

ISLAMIC BONDS JULY 2009 – OCT 2009

Manager or Group Amt US$ m Iss %

1 CIMB 1514 8 37.0

2 Morgan Stanley 499 1 12.2

3 Citigroup 499 1 12.2

4 Maybank Investment Bank 427 2 10.4

4 HSBC 364 3 8.9

6 Deutsche Bank 213 1 5.2

6 BNP Paribas 213 1 5.2

8 Standard Chartered 174 1 4.3

9 AmInvestment Bank 65 1 1.6

10 RHB Capital 65 1 1.6

11 Kenanga Investment Bank 28 1 0.7


25 3 0.6

13 OSK 3 1 0.1

Total 4,090 15 100.0

ISLAMIC BONDS BY COUNTRY JULY 2009 – OCT 2009

Amt US$ m Iss %

Malaysia 3,065 13 75.0

Saudi Arabia 850 1 20.8

Pakistan 174 1 4.3

Total 4,090 15 100.0

www.islamicfi nancenews.comLEAGUE TABLES


SUKUK MANAGERS OCT 2008 – OCT 2009

ManagerManager Commitment

(in US$)Issues

Market Share %

1 Malaysia (Government) 27,159,996,985 176 54.8

2 CIMB 6,808,207,074 131 13.7

3 AMMB Holdings 2,651,970,776 104 5.4

4 HSBC Banking Group 2,292,743,770 46 4.6


1,650,775,109 315 3.3

6 Citigroup 1,267,746,162 7 2.6

7 RHB Banking Group 1,260,427,495 58 2.5

8 Morgan Stanley 1,215,000,000 5 2.5

9 Samba Financial Group 933,261,000 1 1.9

10 Malayan Banking 820,564,574 113 1.7

11 Standard Chartered 620,398,282 17 1.3

12 Barclays Bank 435,500,000 3 0.9

13 Affi n Holdings 390,825,451 40 0.8

14 Cagamas 345,537,496 34 0.7

15 OCBC Bank 252,994,713 35 0.5

16 OSK Holdings 250,459,165 27 0.5

17 EON Capital 217,075,025 85 0.4

18 United Overseas Bank 212,023,081 15 0.4

19 Indonesia (Government) 186,708,865 7 0.4

20 Bukhary Capital 80,786,486 6 0.2

SUKUK MANAGERS JULY 2009 - OCT 2009

ManagerManager Commitment

(in US$)Issues

Market Share %


2 CIMB 4,483,206,371 22 19.7

3= Citigroup 1,215,000,000 5 5.3

3= Morgan Stanley 1,215,000,000 5 5.3

5 Malaysian Industrial Development Finance

725,200,563 79 3.2

6 RHB Banking Group 708,210,600 6 3.1

7 HSBC Banking Group 683,984,621 16 3.0

8 AMMB Holdings 366,018,885 19 1.6

9 Malayan Banking 197,535,749 22 0.9

10 Affi n Holdings 121,358,760 4 0.5

11 United Overseas Bank 100,000,000 4 0.4

12 OSK Holdings 99,365,675 9 0.4

13 Cagamas 90,274,851 10 0.4

14 EON Capital 87,051,316 19 0.4

15 Standard Chartered Bank 61,388,915 3 0.3

16 OCBC Bank 34,936,788 7 0.2

17 Hwang-DBS (Malaysia) 31,283,190 4 0.1

18= Barkun Citra Nusantara 7,356,547 2 0.0

18= Indonesia (Government) 7,356,547 2 0.0

20 Hong Leong Financial Group 2,167,165 1 0.0

SUKUK ISSUERS OCT 2008 – OCT 2009

IssuerIssuer Commitment

(in US$)Issues

Market Share %


2 Bank Negara Malaysia 7,608,477,485 134 17.6

3 Bank Indonesia 3,445,560,099 53 8.0

4 BNM Sukuk 3,106,998,834 13 7.2

5 Petronas Global Sukuk 3,000,000,000 2 6.9

6 Saudi Electricity 1,866,522,000 1 4.3

7 Khazanah Nasional 1,700,063,549 5 3.9

8 Terengganu Investment Authority 1,419,647,927 8 3.3

9 Indonesia (Government) 1,300,000,000 2 3.0

10 Cagamas 927,322,675 34 2.1

11 Perusahaan Penerbit SBSN Indonesia 794,953,034 4 1.8

12 ESSO Malaysia 609,897,044 12 1.4

13 Syarikat Prasarana Negara 577,872,000 2 1.3

14 MISC 572,905,000 6 1.3

15 Danga Capital 454,287,337 2 1.0

16 Pakistan (Government) 440,994,225 3 1.0

17 Penerbangan Malaysia 425,894,378 1 1.0

18 Malakoff 340,715,503 2 0.8

19 Rantau Abang Capital 287,900,000 1 0.7

20 Seafi eld Capital 269,733,106 9 0.6

SUKUK ISSUERS JULY 2009 - OCT 2009

IssuerIssuer Commitment

(in US$)Issues

Market Share %

1 Petronas Global Sukuk 3,000,000,000 2 23.4

2 BNM Sukuk 2,853,076,000 11 22.3


4 Bank Indonesia 882,865,324 14 6.9

5 Khazanah Nasional 706,310,000 2 5.5

6 Syarikat Prasarana Negara 577,872,000 2 4.5

7 MISC 572,905,000 6 4.5

8 Rantau Abang Capital 287,900,000 1 2.2

9 ESSO Malaysia 255,161,700 3 2.0

10 Cagamas 203,168,170 10 1.6

11 Pakistan (Government) 174,265,020 1 1.4

12 CIMB Islamic Bank 86,680,800 1 0.7

13 Mulpha International 49,549,115 6 0.4

14 Hytex Integrated 43,713,000 20 0.3

15 Hubline 42,891,970 4 0.3

16 Perbadanan Kemajuan Negeri Selangor

42,667,140 4 0.3

17 Goodway Integrated Industries 31,657,846 7 0.2

18 Bayu Padu 29,039,285 4 0.2

19 Oilcorp 28,544,300 4 0.2

20 Makro Utama 28,328,600 5 0.2

(12 months) (3 months)

(12 months) (3 months)

Islamic Sukuk league tables refl ect Shariah compliant bonds showing evidence of ownership of assets or their earnings. These results include (but are not limited to) the following securities/assets: Sukuk Salam, Sukuk Mudarabah, Sukuk Ijarah, Sukuk Murabahah, Sukuk Istisna and Sukuk Musharakah.

For more information please contact:

Aimee Webster Telephone: +1-646-223-6816 Email: [email protected]

ALL DATA AS OF THE 7th OCTOBER 2009



ISLAMIC LOANS RAISED OCT 2008 – OCT 2009

Borrower Country Islamic Loan Amount (US$)

1 Rabigh Independent Power Project

Saudi Arabia 1,503,000,000

2 Dubai Electricity & Water Authority

UAE 1,474,000,000

3 Borse Dubai UAE 827,000,000

4 Zain Saudi Arabia 775,000,000

5 Dubai Department of Civil Aviation

UAE 635,000,000

6 Al Ghurair Centre UAE 347,225,701

7 Al Dur Power & Water Bahrain 300,000,000

8 Qatar Real Estate Investment Qatar 275,000,000

9 Dolphin Energy UAE 218,000,000

10 Burgan Co for Well Drilling Trading & Maintenance

Kuwait 125,000,000

11 Boyner Holding Turkey 40,000,000

LOAN BOOKRUNNERS OCT 2008 – OCT 2009

LenderPro Rata

(US$)Full Credit

(US$) DealsMarket

Share %

1 Standard Chartered 542,112,850.50 1,821,225,701.00 2 16.0

2 Dubai Islamic Bank 495,500,000.00 2,109,000,000.00 2 14.6

3= Calyon Corporate & Investment Bank

387,500,000.00 775,000,000.00 1 11.4

3= Al Rajhi Banking & Investment

387,500,000.00 775,000,000.00 1 11.4

5= Al Hilal Bank 368,500,000.00 1,474,000,000.00 1 10.9

5= Samba Financial Group

368,500,000.00 1,474,000,000.00 1 10.9

7 Mashreqbank 173,612,850.50 347,225,701.00 1 5.1

8= WestLB 127,000,000.00 635,000,000.00 1 3.7

8= Emirates Bank 127,000,000.00 635,000,000.00 1 3.7

8= Noor Islamic Bank 127,000,000.00 635,000,000.00 1 3.7

8= Industrial & Commercial Bank of China

127,000,000.00 635,000,000.00 1 3.7

12= Liquidity Management House for Investment

41,666,666.67 125,000,000.00 1 1.2

12= Gatehouse Bank 41,666,666.67 125,000,000.00 1 1.2

12= BNP Paribas 41,666,666.67 125,000,000.00 1 1.2

15= Citigroup 20,000,000.00 40,000,000.00 1 0.6

15= HSBC 20,000,000.00 40,000,000.00 1 0.6

(12 Months) (12 Months)

(12 Months)


LOAN MANDATED LEAD ARRANGERS OCT 2008 – OCT 2009

Lender Pro Rata ($) Full Credit ($) Deals Market Share %

1 Dubai Islamic Bank

1,365,903,212.63 3,283,225,701.00 4 21.0

2 Standard Chartered

687,864,557.16 3,842,225,701.00 5 10.6

3 Samba Financial 583,214,285.71 2,977,000,000.00 2 8.9

4 Calyon Corporate & Investment Bank

430,961,344.54 2,796,000,000.00 4 6.6

5 Al Hilal Bank 368,500,000.00 1,474,000,000.00 1 5.7

6 HSBC 289,294,677.87 2,061,000,000.00 4 4.4

7= Bank of China 214,714,285.71 1,503,000,000.00 1 3.3

7= Alinma Bank 214,714,285.71 1,503,000,000.00 1 3.3

7= National Commercial Bank

214,714,285.71 1,503,000,000.00 1 3.3

10 Al Rajhi Banking & Investment

172,647,058.82 1,075,000,000.00 2 2.6

11 Emirates Bank 170,403,212.63 982,225,701.00 2 2.6

12= Standard Bank 155,000,000.00 775,000,000.00 1 2.4

12= National Bank of Kuwait

155,000,000.00 775,000,000.00 1 2.4

12= Gulf Bank of Kuwait

155,000,000.00 775,000,000.00 1 2.4

15 WestLB 144,647,058.82 935,000,000.00 2 2.2

16= Qatar International Islamic Bank

137,500,000.00 275,000,000.00 1 2.1

16= Qatar National Bank

137,500,000.00 275,000,000.00 1 2.1

18= Industrial & Commercial Bank of China

127,000,000.00 635,000,000.00 1 1.9

18= Noor Islamic Bank 127,000,000.00 635,000,000.00 1 1.9

20 Mashreqbank 61,050,271.45 647,225,701.00 2 0.9

21= Arab Bank Group 61,247,058.82 518,000,000.00 2 0.9

21= Societe Generale 61,247,058.82 518,000,000.00 2 0.9

23= First Gulf Bank 43,403,212.63 347,225,701.00 1 0.7

23= Abu Dhabi Islamic Bank

43,403,212.63 347,225,701.00 1 0.7

23= Ajman Bank 43,403,212.63 347,225,701.00 1 0.7

23= Arab African International Bank

43,403,212.63 347,225,701.00 1 0.7

27 BNP Paribas 42,647,058.82 425,000,000.00 2 0.7

28= Boubyan Bank 25,000,000.00 125,000,000.00 1 0.4

28= Ahli United Bank 25,000,000.00 125,000,000.00 1 0.4

28= Liquidity Management House for Investment

25,000,000.00 125,000,000.00 1 0.4

28= Gatehouse Bank 25,000,000.00 125,000,000.00 1 0.4

32= National Australia Bank

17,647,058.82 300,000,000.00 1 0.3

32= CM-CIC 17,647,058.82 300,000,000.00 1 0.3



SUKUK BY COUNTRY OCT 2008 – OCT 2009

Country Volume Issued Volume Outstanding

Malaysia 31,748,067,179 19,814,639,088

Indonesia 4,384,015,826 1,260,802,000

Eurobond 2,150,000,000 2,150,000,000

US 2,150,000,000 2,150,000,000

Saudi Arabia 2,073,188,667 2,073,188,667

Pakistan 440,994,225 440,994,225

Bahrain 251,750,301 44,801,637

Singapore 67,944,014 67,944,014

Cayman Islands - -

UAE - -

Jersey - -

LOANS BY COUNTRY OCT 2008 – OCT 2009

Country Volume (US$) Market Share(%)

UAE 3,501,225,701 53.7

Saudi Arabia 2,278,000,000 34.9

Bahrain 300,000,000 4.6

Qatar 275,000,000 4.2

Kuwait 125,000,000 1.9

SUKUK BY INDUSTRY OCT 2008 – OCT 2009

Industry Volume Issued Volume Outstanding

Sovereign 21,310,702,795 10,403,898,721

Other fi nancial 12,199,181,169 10,091,891,621

Agency 2,605,826,824 2,549,040,907

Electric power 1,985,214,278 1,959,660,615

Manufacturing 1,584,788,566 574,019,553

Transportation 1,388,048,585 1,231,920,241

Service company 824,887,802 626,246,452

Energy company 772,219,966 138,971,535

Banks 350,133,384 350,133,384

Consumer goods 164,604,772 76,586,601

Gas distribution - -

LOANS BY INDUSTRY OCT 2008 – OCT 2009

Industry Volume (US$) Market Share(%)

Utilities 3,277,000,000 50.3

Financial services 827,000,000 12.7

Telecommunications 775,000,000 11.9

Government 635,000,000 9.7

Retail and supermarkets 387,225,701 5.9

Oil and gas 343,000,000 5.3

Real estate 275,000,000 4.2

GLOBAL ISLAMIC VOLUME SUKUK/LOANS (US$ IN MILLIONS)

For more information please contact: Aimee WebsterTelephone: +1-646-223-6816 Email: [email protected]

(12 Months) (12 Months)

(12 Months)

(12 Months)


1Q - '07 2Q - '07 4Q - '07 1Q - '083Q - '07 2Q - '08 3Q - '08 1Q - '09 2Q - '09 3Q - '09 TD 4Q - '09 TD4Q - '08

Sukuk

Loan

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000


SHARIAH INDEXES


FTSE Shariah Global Equity Index Series

IndexNo. of

c onstituents

Performance based on percentage (%)

1 Month 3 Months 6 Months Year-to-Date 1 Year 3 Years 5 Years

FTSE SHARIAH GLOBAL EQUITY INDEX SERIES

FTSE Shariah All World Index 1065 4.39 15.62 37.88 27.73 3.50 2.41 39.55

FTSE Shariah ASEAN Index 53 6.45 20.57 62.26 55.18 19.54 41.03 100.08

FTSE Shariah Asia Pacifi c ex Japan Index 321 8.61 21.39 57.73 61.21 26.68 33.35 122.30

FTSE Shariah Asia Pacifi c Index 533 4.47 16.31 47.52 37.66 16.60 6.73 61.77

FTSE Shariah Dev Asia Pacifi c ex Japan Index 124 8.45 19.49 57.09 55.16 26.07 46.73 140.00

FTSE Shariah Developed Asia Pacifi c Index 336 2.52 13.42 42.88 27.60 12.20 -0.02 46.00

FTSE Shariah Developed Europe Index 161 4.42 19.77 44.58 27.24 5.35 0.72 46.89

FTSE Shariah Developed ex Japan Index 552 4.26 15.32 34.74 23.93 1.08 2.34 35.04

FTSE Shariah Developed ex US Index 526 3.97 16.73 43.02 27.73 7.58 2.94 51.08

FTSE Shariah Developed Index 764 3.72 14.75 35.02 23.08 1.73 0.25 33.18

FTSE Shariah Emerging Index 301 8.74 21.29 58.22 66.18 15.70 21.52 121.47

FTSE Shariah Europe Index 189 4.74 19.94 45.35 29.05 4.16 -0.79 46.39

FTSE Shariah Eurozone Index 89 5.67 22.76 50.78 25.73 2.50 0.94 53.18

FTSE Shariah Japan 100 Index 100 -0.55 9.21 33.73 14.18 2.00 -16.06 20.39

FTSE Shariah Latin America Index 43 12.39 23.24 69.05 82.71 15.44 49.59 244.52

FTSE Shariah Middle East & Africa Index 40 0.79 9.11 32.49 34.76 7.90 31.76 117.97

FTSE Shariah Multinational 150 Index 154 3.32 13.98 30.89 20.59 0.77 3.93 36.60

FTSE Shariah North America Index 260 3.72 12.67 27.81 19.29 -3.48 -0.37 22.71

FTSE Shariah USA Index 238 3.47 12.84 27.44 18.50 -3.78 -2.27 18.61

FTSE BURSA MALAYSIA INDEX SERIES

FTSE Bursa Malaysia EMAS Shariah Index 247 3.02 13.82 46.99 42.15 31.40 51.50 70.83

FTSE Bursa Malaysia Hijrah Shariah Index 30 3.52 13.38 42.21 38.70 28.89 69.33 110.46

FTSE DIFX SHARIAH INDEX SERIES

FTSE DIFX Qatar 10 Shariah Index 10 5.03 9.44 43.70 22.73 -16.34 30.69 -

FTSE DIFX Kuwait 15 Shariah Index 15 2.20 6.63 31.66 15.97 -30.11 -1.44 -

FTSE SGX SHARIAH INDEX SERIES

FTSE SGX Asia Shariah 100 Index 100 4.42 15.76 41.60 28.18 10.03 -4.08 37.78

FTSE SET INDEX SERIES

FTSE SET Shariah Index 50 10.96 20.65 80.85 66.12 21.74 47.66 92.29

TSEC TAIWAN INDEX SERIES

TSEC Taiwan Shariah Index 55 11.35 25.23 53.14 69.37 27.26 19.07 67.99

For further information visit www.ftse.com, email [email protected] or call your local FTSE offi ce:

Source: FTSE Group, total return data in USD as at 30th September 2009

© 2009 FTSE International Limited (“FTSE”) ®. All rights reserved. “FTSE®”, “FT-SE®” and “Footsie®” are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE under licence. “All-World”, “All-Share” and “All-Small” and “FTSE4Good” are trade marks of FTSE. Rights in each index vest in FTSE, the London Stock Exchange Plc, the Financial Times Limited and/or FTSE’s relevant partners. Neither FTSE, the London Stock Exchange Plc, the Financial Times Limited nor FTSE’s relevant partners makes any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the indexes and/or the fi gure at which the said index stands at any particular time on any particular day or otherwise. Each Index is compiled and calculated by FTSE and/or its relevant partners. However, neither FTSE nor the London Stock Exchange Plc nor the Financial Times Limited nor FTSE’s relevant partners shall be liable (whether in negligence or otherwise) to any person for any error in any index and neither FTSE nor the London Stock Exchange Plc nor the Financial Times Limited nor FTSE’s relevant partners shall be under any obligation to advise any person of any error therein.

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London +44 (0) 20 7866 1810Madrid +3491 411 3787New York +1 800 747 FTSE(3873) Paris +33 (0) 1 5376 8288

San Francisco +1 888 747 FTSE(3783) Sydney +61 9293 2866Tokyo +81 3 3581 2811

The FTSE Shariah All-World Index in September fi nished the month in positive territory, up 4.4%, with Emerging markets outperforming Developed markets by 5% over the period. The best performing region in September was Latin America, with a performance of 12.4%, followed by Emerging Europe with a performance of 9.5%. Peru was the best performing country with a performance of 32.3%, with Portugal being the second best performing country fi nishing the month on 19.2%. Both Poland and Morocco were the worst performers in September with a performance of -2.8% and -2.6%, respectively.

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EVENTS DIARY 2009

DATE EVENT VENUE ORGANIZER

October

12th – 13th 5th Middle East Insurance Forum Bahrain MEGA Events

12th – 15th Funds World Turkey 2009 Istanbul Terrapinn

13th – 14th Opportunities and Challenges in the World of Islamic Finance

UK ISFINCO

20th Brunei IFN Roadshow Brunei Islamic Finance events

November

2nd – 3rd Private Client Middle East Dubai IIR

2nd – 3rd Private Client Symposium Middle East Dubai IBC

2nd – 4th Islamic Funds World Middle East 2009 UAE Terrapinn

2nd – 6th 6th KLIFF 2009 Kuala Lumpur Cert Events

3rd 4th World Islamic Infrastructure Finance Conference

DohaMEGA Events

4th – 5th The International Real Estate FinanceSummit 09

London ICG-Events

5th Pakistan IFN Roadshow Pakistan Islamic Finance events

5th Islamic Finance Intelligence Summit London FT Global Events

9th India IFN Roadshow India Islamic Finance events

9th – 10th Real Estate Investment World Summit Riyadh Naseba Group

9th – 10th Islamic Financial Planning & Wealth Management Conference 2009

Kuala Lumpur IBFIM

25th – 26th Pan African Islamic Banking & Finance Summit

Nigeria MNCapital

3rd World Islamic Infrastructure Finance Conference

Qatar MEGA Events

Islamic Investment World Middle East 2009 Middle East Terrapinn

December

6th – 8th 16th World Islamic Banking Conference Bahrain MEGA Events

14th Kuala Lumpur Takaful Conference 09 Kuala Lumpur IBFIM

14th – 15th 2nd Annual MENA Infrastructure Finance Conference UAEFlemingConferences

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Abu Dhabi Investment Council 9ACL Bank 5ADCB 9, 13ADFM 10ADIB 9Aeon Credit Services 16AFB 7Ajman Bank 10, 11Al Fahim Group 10Al Safwa Islamic Financial Services 10Allen & Overy 22Al-Subeaei Group 9AMDWX 3Arqaam Capital 9Atlanticlux Lebensversicherung 13Aviva 24Bahraini Saudi Bank 10Bank Islam 7Bank of China 5Bank Rakyat 5Bank Thai 12Barclays 24BDWG 10BFX 10BIBD 7BIMB Holdings 7BKME 13Bloom Properties 9BMB Islamic 18BNM 6, 7, 11, 21, 23Boeing 10BRI 12BRI Syariah 12Brunei Investment Agency 9BTMU 12, 16Cagamas 8

CBB 10Celent 19CI 12, 1CIMB 5, 7, 12CIMB Investment Bank 23CIMB Islamic Bank 12, 23Credit Suisse 24DAG 7Daimler 11Daimler Financial Services 10Db x-trackers 8DBS Bank 12DFG 7DFM 10DIFC 8, 9, 12Doha Bank 16Dubai Group 7EIB 10Elaf Bank 10Emirates Airways 10Ernst & Young 5Etihad Airways 10Fajr Capital 9, 15Fitch 12, 13FSA 16FWU AG 11FWU Group 13Gargash Enterprises 10Hayel Saeed Anam & Co Group 10HBME 13HSBC 24HSBC Amanah 14HSBC Amanah Takaful 12HSBC Holdings 12Hydra Properties 9IBJ Asset Management 16

ICBC 5ICD 4IDB 3, 4, 21IFSB 16, 21IMF 11ING Investment Management 9Investment Dar 24Islamic Bank of Asia 12Islamic Bank of Britain 7Jamsostek Inc 4JBIC 17KFH-Bahrain 10Khaleeji Commercial Bank 10Khazanah Nasional 6, 9, 15LKSA 13LTH 7Malaysia Airlines 6Malaysia Airport Holdings 6Malaysian Trustees 23MARC 23MASIC 9Maybank Investment Bank 7MCB 12Meydan Group 10MMC Corp 7Moody’s 9Multilateral Investment Guarantee Agency 8NBAD 9Nomura Asset Management 16Noor Islamic Bank 10Orix Leasing 16PAAB 6, 12Pengurusan Air SPV 12PLSA 13Port of Tanjung Pelepas 7PQFT 11

Proton 6PRU BSN 24Public Investment Bank 7Qatar Airways 10Qatari Business Association 7QFC 11QIB 10QNB 9Rakbank 13RAM 6, 12, 13Reem Finance 9RHB Investment Bank 8Salaam Halal 11Salama 11Saturna Capital Corporation 3SBI Holdings 4SC 7SCBP 11Sime Darby 7SMBC 12, 16StoneCross Capital 3Swiss Re 11Syarikat Takaful 11t’azur 11Tadhamon Capital 10Tadhamon International Islamic Bank 10TDIC 13Tenaga Nasional 6The National Bank of Uganda 3Toyota Capital Malaysia 16Unicorn Investment Bank 10VHV 13World Bank 8, 21Zaid Ibrahim & Co 23

Company IndexCompany Page Company Page Company Page Company Page

Country Index

Bahrain Banking system upgrade 10 New kid on the block 10 Progress tracking 10Brunei Seeking talent 7France Islamic fi nance links sought 8Global “Scholars may be held accountable” 8 Growing attraction 8 Market Report—Linking Shariah based products and socially responsible investing 23 Focus — Islamic fi nance and global fi nancial stability 20India Islamic bank in March 5Indonesia Going into business Shariah style 4 Government bonds to not exceed 15 years 7 IFN Report — Sukuk going once, going twice..sold! 14Japan SBI sets up Islamic fund 4 Country Report — The development of Islamic fi nance in Japan 16Kuwait Fitch affi rms BKME 13Luxembourg Insurer’s outlook negative 13Malaysia A growth engine 4 Secondary platform on the way 4

Malaysia Dominant player 5 China’s fi rst moves into Islamic banking? 5 Sukuk expected in 2010 6 Dubai Financial Group’s stake taken up 7 Port eyes Sukuk 7 Move to entice investors 7 Mega bank candidate 7 High targets 7 Sukuk due from Sime 7 New market for Swiss Re 11 Re-branding move 11 Limited depth and breath 12 CIMB maintains its brawn 12 ‘AAA’ for water operator 12 RAM reaffi rms PLSA Sukuk 13 Termsheet — CIMB Islamic’s Tier 2 Junior Sukuk Program 23Pakistan BancaTakaful venture 11Qatar Bank: No oilfi eld investment in Iran 9 t’azur to operate in QFC 11Saudi Arabia No need for loans 9Singapore Meet the Head — Hooman Sabeti-Rahmati 22UAE IFN Reports — Créme de la créme 15

UAE Tie-up to push Sukuk market in the GCC 8 Mortgage for house buyers 8 “Inadequate provisions by banks” 8 Malaysian fi rm take stake in Fajr Capital 9 Blooming well 9 Ijarah hits the race tracks 10 Conquering the skies 10 Islamic bank offers brokerage service 10 Islamic fi nancing to buy Mercedes-Benz vehicles 10 Ajman Bank to offer Salama products 11 TDIC Sukuk gets ‘AA’ 13 ‘AA’ for HBME 13 Sovereign savior 13 Rakbank well capitalized 13Uganda Going for Islamic fi nance 3UK Profi table rates 7 Gain for Islamic ETFs 8 Growing business 11US Third Amana fund 3 Longevity platform 3

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