Abu Dhabi Investment House unveils Islamic equity

Abu Dhabi Investment House (ADIH) launched Islamic equity and structured products aimed at offering rare opportunities to investors, ADIH in a statement said. In the statement the investment institution said: "Investors can participate in two new funds being launched by the firm in co-operation with its Geneva-based subsidiary." The initial offering period lasts from until July 31.

The minimum subscription amount is $100,000. ADIH Islamic Helvetic Fund-Global Islamic Equity, the new equity fund, will invest in shares of companies worldwide in accordance with the principles of Shari'a investment. The new fund's strategy aims at capital preservation while offering an appealing alternative to classical asset classes such as fixed-income and money-market investments: return objectives are set to 10 per cent per year net of fees with a volatility of 5 per cent.

Based on a multi-management approach which has been rarely available among Shari'a-compliant equity funds up to now, the fund will gradually allocate its assets between complementary investment strategies, combining sector and regional allocation as well as fundamental and quantitative models. The fund's launch is timed to exploit robust growth rates in emerging markets and possible recovery of the equity markets globally during the second half of 2008.

Pakistan's Faysal Bank to Expand Outlets, Open Islamic Division

Faysal Bank Ltd. plans to expand its domestic branch network in Pakistan and start a new Islamic division to take advantage of rising demand for Shariah-compliant products and farm loans.

The bank will increase its number of outlets to 150 by December 2009, and will start the Islamic banking unit next week, Chief Executive Officer Naved A. Khan said in an interview at his Karachi head office yesterday. The bank, Pakistan's ninth-biggest, has 107 branches across the nation and plans to add 23 this year.

Khan is seeking to keep pace with bigger rivals including Bank Alfalah Ltd. in an economy forecast to grow 5.8 percent this fiscal year. Overseas banks such as ABN Amro Holding NV and Standard Chartered Plc are expanding in Shariah-compliant finance, a market Standard & Poor's estimates is worth $500 billion and growing 10 percent annually on booming oil revenue.

RHB expanding in Asean region

KUALA LUMPUR: RHB Bank Bhd intends to expand its presence within the Asean region to countries like Vietnam and Indonesia, said group managing director Michael Joseph Barrett.

International operations were expected to contribute 10% of earnings by 2010, from 4% in fiscal year 2007, he said after the RHB Capital Bhd AGM yesterday.

“Indonesia is a vibrant market with many Malaysian companies operating there. Furthermore, its economy is driven by natural resources,” he said, adding that the bank was looking for acquisition opportunities.

The bank, which already has a presence in Thailand and Brunei, intends to widen its footprint in those countries.

Amid concerns of a global economy slowdown, Barrett believes there are opportunities to be tapped, as prices of assets are likely to come down.

Barrett said RHB Bank was expected to reduce its non-performing loans ratio to below 3% and improve return on equity and return on assets to 15% and 1% respectively by year-end.

It also intends to open eight to 10 new conventional banking offices and six to eight Islamic banking branches throughout Malaysia this year.

Despite its growth Islamic finance faces obstacles

Islamic Finance, although still exotic to many bankers, is well-known to be one of the fastest growing segments in global finance.

The figures related to this sector have become commonly known over the last few years:

• The value of global transactions is estimated to be somewhere between $500bn to $1 trillion.

• Islamic finance grows at 15% to 20% annually, doubling at least every five years.

• The market for Islamic insurances, Takaful, grows at 25% annually, but from a relatively low basis of around $4bn currently.

• There are 470 Islamic financial institutions worldwide.

Less well-known are the obstacles faced by the infant industry. These hurdles have been discussed by the speakers of the forum at the first Middle East International Banking, Financial Technology & Services Exhibition (MEFX) in Dubai.

Sanjay Vig, Managing Director at DIFC-based Alpen-Capital, says that Western regulators such as the Swiss Banking Commission failed to develop clear rules for Islamic Banking: 'The lack of initiative kept the 'the world's safe' from entering Islamic finance as intensively as banks in the UK did.'

Stanlib launches Africa-focused Sharia equity fund

Dubai: Stanlib, the $45 billion Johannesburg-based asset management operation of the Standard Bank of South Africa, has launched an Africa-focused Sharia equity fund.
The fund currently on a road show in the Gulf countries is targeting to raise $250 million. The open-ended fund registered in Ireland will invest in Sharia-compliant equities from across Africa except South Africa.
"There is a large pool of Sharia-compliant assets in Africa. As Africa is one of the last frontiers of assets with low correlation to the Western markets, it provides great opportunities for Gulf investors," said Ashraf Mohammad, portfolio manager of the fund.
The new fund targets a return of 15 to 20 per cent and will not charge a performance fee. While it offers twice monthly repurchase option, the net asset value denominated in dollars is published every day. The Fund House said yesterday that although the net asset value will be published in the dollar, the funds underlying investments would be in equities denominated in various African currencies.

Islamic finance in need of more diversity

A lack of diversity in their investments could mean Islamic asset managers lose out to conventional firms, a report published last week said.

Accounting firm Ernst & Young said Muslim investors hold $1.6 trillion in assets of all kinds, a figure forecast to rise to $2.7 trillion by 2010.

Islamic funds, which invest in accordance with Islamic law, ignore important asset classes and in Saudi Arabia, one of the world's two biggest markets for Islamic asset management, fund subscriptions have fallen since 2005, the report said.

"As demand for diversification grows, Islamic institutions will face the risk of losing significant market share to conventional institutions that can provide more comprehensive coverage," Ernst & Young said in the report.

By the end of March there were more than 500 funds globally that comply with Islamic law, Ernst & Young said in its Islamic Funds and Investments report, launched at a two-day Islamic banking conference that ended last Monday.

Some 153 Islamic funds were launched last year, and the figure is projected to rise to 1,000 funds by 2010, Ernst & Young said.

Atlas Asset to launch Islamic Income Fund

KARACHI: Atlas Asset Management Limited (AAML) will launch Atlas Islamic Income Fund (AIIF) soon. According to a company’s statement, AIIF will be AAML’s fourth open-end mutual fund and fifth overall.

It said, “the main objective of AIIF would be to offer investors Shariah compliant investment avenues, which would provide a consistent stream of income with long-term capital preservation.”

He said that the Fund would realise objectives by investing in Shariah compliant debt instruments of entities with minimum rating of A minus (A-). These debt instruments will include certificate of investments, bank deposits, placement of funds under Mudarabah, Musharikah and Murabahah Shariah-Compliant instruments, Sukuks and contracts, securities, issued by companies, organisations and establishments. staff report

Daiwa Asset Management To Launch Singapore’s First Shariah-Compliant ETF

Daiwa Asset Management (Singapore) Ltd. (Daiwa AM) and Singapore Exchange Limited (SGX) recently announced that Daiwa AM will launch Singapore’s first Shariah-compliant Exchange Traded Fund (ETF) on SGX. The Daiwa FTSE Shariah Japan 100 (DaiwaETF) will offer Islamic investors instant access to the top 100 Shariah-compliant companies in Japan by market capitalisation.

Shariah is the divine Islamic law that governs the practical aspects of a Muslim’s daily life. The DaiwaETF seeks to track the performance of the FTSE Shariah Japan 100 Index, which is designed to represent the return of the largest and most liquid listed companies in Japan that comply with Islamic legal principles.

Said Mr Michihito Higuchi, President & Chief Executive Officer of Daiwa Asset Management Co. Ltd, the parent company of Daiwa AM, “The DaiwaETF is the first Shariah-compliant ETF in Singapore and also our first ETF in Singapore. This ETF serves as an excellent proxy to the growth prospects of some of the best listed companies in Japan. Islamic investors can be assured that this ETF is in full compliance with the Shariah investment principles at all times as Yasaar Limited will be undertaking the Shariah screening at the fund level.”

Indonesia Prepares an Islamic Bonds Industry

The world’s biggest Muslim nation struggles to build its Islamic finance industry

In a bid to drive growth in the fledgling Islamic bonds industry, Indonesia’s central bank says it will relax the rules for investors who buy the bonds.

Despite being home to roughly 10 percent of the world’s estimated 1.3 billion Muslims, Indonesia has struggled to build up its Islamic finance industry, lagging well behind countries such as Malaysia, Singapore and even Pakistan.

However, the recent introduction of a new law that would allow the government to issue Sukuk, or Islamic bonds, is expected to trigger significant growth in the sector. The government announced this week it has already set aside US$2 billion in assets to back the bonds, which it expects to sell in two separate issues this August and October. Sukuk bondholders are paid income derived from assets such as rent from property because Islamic law bans lending for interest.

Mulya Siregar, Bank Indonesia’s head of Islamic finance, pledged this week that the central bank would change the rules surrounding Sukuk to boost investor interest in the securities.

As the rules stand, investors in Islamic bonds are required to hold them until maturity

AMU now offers Islamic banking and finance course

Aligarh Muslim University officials noted the presence of a number of banking enterprises working on Islamic banking principles. Looking at the employment potential, the University has decided to offer a PG diploma course in Islamic banking & finance..

THE ALIGARH Muslim University (AMU) will be offering a course on Islamic banking and finance from the next academic year onwards. Vice chancellor, professor PK Abdul Azis, recently had a detailed discussion with a team of experts consisting of Dr Mohammad Nejatullah Siddique, former AMU professor and a well known expert on Islamic banking and finance, Sayed Mohammad Beary and Dr Sariq Nasir of Bearys Amnah Investments Pvt Ltd, Bangalore, regarding the commencement of the course.

The meeting noted rapid changes taking place in the banking arena, both within India and abroad, moving towards principals that guide Islamic banking and finance management systems. The meeting noted the presence of a number of banking enterprises in India working on Islamic banking principles and the segment is poised for rapid growth. In the context of the emerging growth and employment potential, the University has decided to offer a post graduate (PG) diploma course in Islamic banking and finance from the next academic year onwards. Dr Azis said that University would also consider the possibility of establishing a new department dedicated for this branch in the Aligarh Muslim University.

The vice chancellor has constituted a high power committee consisting of Dr Mohammad Nejatullah Siddiqui (chairman), Dr Shariq Nisar (Bearys Amnah Investment Pvt Ltd, Bangalore) and Dr Javed Akhtar, chairman, department of business administration, AMU, to prepare a detailed proposal for commencing this programme. The committee is expected to submit its report within two months.

Jadwa Offers African Investment Opportunities

RIYADH — The chairman of Jadwa Investment, Prince Faisal Bin Salman, hosted South African Ambassador John Davies and a number of businessmen at an “Investor Forum” for launching the new Jadwa Africa Equity Freestyle Fund. The fund is the first Shariah-compliant Africa fund offered by any institution in the region.

The offering of the Africa Fund places Jadwa in a leading position in the investment banking industry.

Remarkably, Jadwa has launched as many as 13 investment funds since June last year.

The comprehensive range of funds offered by Jadwa ranked it at No. 6 among the Saudi banks in terms of the assets under management, which exceeded SR5 billion.

“Jadwa, since its establishment in the first quarter of 2007, has made great achievements and Jadwa Africa Equity Freestyle Fund, the first of its kind, is a new milestone in its achievements,” Ahmed Al-Khateeb, managing director and CEO of Jadwa Investment, said in his welcome speech.

“Jadwa has set itself as a leader in Shariah-compliant investments in the world through its high quality services and superior investment solutions,” he added.

The ambassador was pleased with foresight and wisdom of Jadwa Investment in seeing the brighter side of African countries and with the introduction of the Jadwa Africa Equity Freestyle Fund.

Sheikh bans alcohol at Cairo hotel

A decision by the Saudi owner of the Grand Hyatt Hotel in Cairo to ban the sale of alcohol and destroy millions of dollars worth of beverages has sparked a debate in Egypt.

The international company which runs the hotel has urged Sheikh Abdulaziz al-Brahim - a relative of the Saudi king - to revoke his decision, fearing it could drive away Western tourists and may even lead to the hotel losing its five-star rating.

The Grand Hyatt occupies one of the most expensive sites overlooking the River Nile. It is only minutes from the diplomatic quarter, where the British and American embassies are located.

Like all five-star hotels in Egypt, alcohol used to be available there - but not any more. It is unclear what prompted the owner Sheik Al Brahim to take this controversial measure.

Staff at the hotel are reluctant to talk about the whole affair. But a barman told me that they now only serve soft drinks and that he saw with his own eyes how expensive whiskey, liqueurs and fine wines were emptied down the drains of the hotel.

BBT gets new head of banking division

BBT has announced the appointment of Evan Grous as the new head of its banking, accountancy and finance division, operating out of the Dubai International Financial Centre (DIFC).

Grous, an Australian national, joins BBT from a search and recruitment company in Sydney, Australia, where he was business manager for Asia and the Middle East.

The banking, accountancy and finance division focuses on investment; local and international banking; Islamic banking; private equity; accounting into industry sectors; insurance; global resourcing and HR consultancy services.

The division opened in 2007 in response to the rapid growth in the sector within the region, with its epicentre in the DIFC, and the associated demand for world-class skills. BBT is working to attract specialists in areas such as Islamic banking and finance to Dubai, through its global network of resourcing offices.

Shariah-compliant commodity trading gathers pace in Dubai

Islamic Finance is not only dedicated to Islamic bonds (sukuk) or to funds investing in the stocks of firms which operate in a Shariah-compliant way.
It also has a prominent role to play in commodity trading. With the current boom in the commodity sector and in Islamic finance, financial institutions find themselves in a win-win-situation.
While Islamic Finance grows at an average of 20% p. a., according to Dr. David Rutledge, CEO of the Dubai Multi Commodity Centre (DMCC), the number of commodity managed funds has been growing at a compound annual rate of 98.2% in recent years.
Commodity receipt guarantees
With the Global Multi-Commodities Receipt (GMR) the DMCC offers owners of commodities a standardised system with which they can place their goods (such as gold, tea, wheat or crops) in a dedicated storage area.
By storing the goods, the owners receive a receipt, the Dubai Commodities Receipt (DCR) with which they can get a loan from a partner bank of the DMCC.
A potential purchaser who wants to acquire the assets can do so through one of the DMCC’s 16 member banks.
Since conventional loans are not permissible in Islam, Dubai-based HSBC Bank Middle East also offers the option of processing a commodity Murabaha-contract through its HSBC Amanah a long-standing player in the Islamic banking market.
Under Murabaha, the bank acquires the assets for a specific order by a customer. The bank pays for the commodities immediately at a spot price. Since interest is forbidden the financial institution then sells the entire load of goods at a deferred payment but at a higher price to the purchaser.
Reducing default risk
With the margin added to the spot price the purchase becomes permissible. The bank can reduce the default risk of the purchaser by demanding a down-payment or a letter of credit which proves the liquidity and good-standing of the customer. Murabaha is frequently used to synthesise money market transactions.
The advantage of the paperless, online-based GMR-system is 24/7-access from any place in the world. It is accessible to traders in Singapore, South Korea and Malaysia and will be soon expanding to Europe and the US.
In order to enhance Shariah-compliant commodity trading, the DMCC announced in March that it is currently setting up a separate entity called the Dubai Commodity Asset Management DCAM.
DCAM, established with an initial capital of $6.8m, entered in a joint-venture with DIFC-based Shariah Capital. The joint venture firm, Dubai Shariah Asset Management (DSAM), will be owned 51% by the DMCC and 49% by Shariah Capital.