JA­PAN’S LACK OF SUKUK RULES SPURS MALAYSIA DE­BUTS

Insurance - - INDUSTRY UPDATES -

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.

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