JAPAN’S LACK OF SUKUK RULES SPURS MALAYSIA DEBUTS
Source: Borneo Post Online, 11 June 2014
Bank of Tokyo-Mitsubishi UFJ is planning a debut sukuk in Malaysia as Japan’s lack of Islamic finance rules forces companies overseas to tap Muslim investors. Bank of Tokyo-Mitsubishi UFJ (Malaysia) Bhd, a member of the financial group that’s part of Japan’s biggest lender by market value, has set up a US$500 million multicurrency programme to sell debt complying with Koranic principles and is also considering offering the world’s first yen-denominated sukuk, according to a June 5 statement. The issuance will help manage the bank’s increasing Islamic financing needs, it said. The lender joins Japan Bank for International Cooperation and the North Asian nation’s Aeon Credit Service (M) Bhd in choosing Malaysia to sell Islamic bonds, taking advantage of syariah-compliant banking assets that are set to double to US$3.4 trillion worldwide by 2018. The 2.83 per cent average yield on dollar sukuk globally is near a oneyear low, while conventional emerging-market US currency notes are paying 5.26 per cent, according to Deutsche Bank AG and JPMorgan Chase & Co indexes.
“The experience of Bank of TokyoMitsubishi will be useful for other Japanese institutions to copy,” Raj Mohamad, managing director at Five Pillars Pte Ltd, a consulting firm in Singapore, said in an e-mail interview. “The awareness of Shariah products will improve and slowly it will give investors the opportunity to tap Japanese corporates.” While Japan has no Islamic banking rules of its own, the government amended legislation in 2008 to allow subsidiaries of the country’s lenders and insurers overseas to provide financial services in accordance with religious tenets. Bank of TokyoMitsubishi UFJ Malaysia offers Shariah-compliant loans and guarantees among its products in the Southeast Asian nation. Japan Bank for International Cooperation, a state-owned lender, announced in April that it was considering selling its first Islamic bonds this year to fund a project in Malaysia. Aeon Credit Service (ACSM), the local unit of a Japanese consumer finance provider, said in December it was planning to sell sukuk with no set maturity, adding to previous offerings. Average yields on global dollar sukuk have dropped 59 basis points, or 0.59 percentage point, in 2014 and reached a one-year low of 2.78 per cent on May 29, the Deutsche Bank index shows. That compares with an 84 basis point decline in the JPMorgan gauge of developingmarket debt.