Boustead eyes Islamic banking ops in China

KUALA LUMPUR: Boustead Holdings Bhd plans to establish an Islamic banking operations in China via a joint venture with its foreign partner the Bank of East Asia (BEA).

It was now "exploring that opportunity with BEA," group managing director Tan Sri Lodin Wok Kamaruddin said, adding that the proposal was subject to approvals from the authorities concerned.

He said the potential for Islamic banking operations in China was "quite great" as there were some 100 million Muslims in the north-western region of the republic alone.

Speaking after the company AGM yesterday, Lodin said the group's plantation division delivered substantial profits last year as a result of steady crude palm oil (CPO) prices and he was confident CPO prices would remain bullish on the back of strong demand from India and China.

"We believe CPO prices would continue to be around RM3,000 to RM3,500 (per tonne) for a while," he said.

Lodin also said Boustead had implemented various yield improvement programmes to increase its yield from 20 tonnes per hectares to about 25 tonnes per hectare.

"We are also looking at introducing various processes to further improve the yield of the plants.

Malaysia's Affin Islamic unveils new lending tool

KUALA LUMPUR, April 1 (Reuters) - Malaysian lender Affin Islamic Bank Bhd launched on Tuesday an Islamic financing strategy to help small firms raise funds and increase the industry's share of domestic banking assets.

Under the new strategy, banks will be partners instead of just lenders in the development of projects such as the construction of homes.

In its pioneer project, Affin Islamic will team up with small Malaysian property firm Mutiara Goodyear Development (MGDE.KL: Quote, Profile, Research) to develop a 180 million ringgit ($56.30 million) apartment project in northern Penang state.

Under the deal, the two companies will form a special purpose vehicle that will buy land to be used for the development and jointly undertake the project. Profits and losses from the project would be shared equally between the parties.

Mostly Muslim Malaysia is prodding its Islamic lenders to develop products to draw more investors as part of a plan to make the country a global hub for the $300 billion Islamic finance sector.

Record crude oil prices have fuelled a surge of petrodollars into Asia, with cash-rich Gulf investors hungry for investments that comply with the sharia or Islamic law.

Malaysian Islamic assets such as property and bonds are popular with investors who want exposure to Asia's growth story while complying with the sharia, which forbids interest-bearing loans and investments in alcohol and gambling.

Mutiara Goodyear Chief Executive Kee Cheng Teik said Affin Islamic's financial backing would boost investor confidence in the development.

"Purchasers do not only look at the strength of the development and design, they also look at the strength of the financials, that we can carry through all the project, " Kee told reporters.

Islamic finance can give early warning of debt woes

Fri Apr 4, 2008 4:43am EDT

HONG KONG (Reuters) - The transparency and structure demanded of Islamic finance that is attracting investors burnt by the subprime crisis could well have provided warning signals of the impending debt turmoil.

The subprime crisis has seen an exodus from riskier asset classes, partly as investors veer away from sophisticated products such as collateralized debt obligations that are difficult to fathom.

Investors say Islamic finance products demand greater transparency and accountability from company management, so it would be more obvious when companies are getting into debt problems.

Under Islamic finance, because the lender is also an investor, he remains an active participant through the life of the transaction and is in a position to rectify mistakes before the situation worsens, bankers say.

This appeal has added to the growth in Islamic finance.

Global bond and loan offerings issued according to Islamic guidelines have jumped 64 percent to $5.5 billion so far this year, data from Thomson Financial shows.

Islamic finance assets are growing at an annual pace of 20 percent and are set to hit $2 trillion in 2010 from the current $900 billion, fuelled in part by a flood of petrodollars generated by the rise in energy prices.

Islamic finance principles stipulate that deals must be based on tangible assets and require tight controls on debt levels, features analysts say offer some protection to investors and ensure corporate accountability.