Growth expected for Malaysian Insurance Sector

Projections foresee growth in 2011 topping 12% across the Malaysian insurance industry. The Malaysian government has unveiled stimulus plans and other legislative initiatives which together with an historically low interest rate environment have lead to very favorable conditions for growth in the insurance sector. All forecasts however need to be tempered by an awareness of uncertainties about the outlook for a number of western economies and the possible resulting downward pressures on overall performance of the global insurance industry.

Malaysia’s economy grew 7.2 percent last year, the highest rate experienced since the year 2000. The Malaysian government has aggressively pursued substantial investment programs with the explicit goals of doubling GDP per-capita and turning Malaysia into a high income country by 2020. New parliamentary initiatives such as the New Economic Model (NEM), Economic Transformation Program (ETP) and the Tenth Malaysian Plan will, according to industry analysts, lead to a growth in demand for insurance products and services.

The Life Insurance Association of Malaysia (LIAM) held that in addition to these numerous initiatives announced in the Economic Transformation Program, including the private pension plan and worker insurance scheme, economic conditions in the country are ripe for further life insurance development. Consumer confidence in Malaysia has shown marked improvement, rising to 107 points on the latest Nielsen Global Consumer Confidence Index, its highest score since the third quarter of 2006. Around 41 percent of the Malaysian population is currently insured, according to the LIAM. This level of life-insurance penetration is low by a developed economy’s standards and will be an important factor in the further growth of the sector. The current low interest rate environment will act as an impetus to consumers seeking high-yielding products like insurance in Malaysia.

The LIAM reported that new business sales for life insurance rose 19 percent on a weighted premium basis during the first three quarters of 2010. This growth was accredited to strong performances in regular premium sales which were up 21 percent compared with the identical period in 2009. Single premium business, however, registered a small 1 point decline.

The LIAM’s views were supported by the General Insurance Association of Malaysia (PIAM), the Malaysian Takaful Association (MTA) and Allianz Malaysia Bhd (AMB).

The General Insurance Association of Malaysia (PIAM) executive director Mr. Lim Chia Fook reported that, in absence of any further adverse impacts on the world economy, the insurance association foresees the outlook for the general insurance industry this year to be very positive with an increased demand for insurance in all areas expected. The general insurance industry recorded that for the third quarter of 2010, gross direct premium estimates were 3.16B$, demonstrating a growth of nine percent over the same three quarter period during the previous year.

The Malaysian medical and health insurance sector (MHI) is likewise expected to sustain powerful development, driven by upward trends in consumer awareness coupled with an increasing want for cover against escalating healthcare costs. Mr. Lim added that the introduction of the health insurance plan designated for foreign workers would further drive growth in the MHI sector. PIAM anticipated new areas of industry growth through micro-insurance products, especially considering the rapidly developing small and medium enterprise and biotechnology sector in Malaysia.

The Malaysian Takaful Association (MTA) expects the Islamic insurance industry to continue to improve on its 10% market penetration, particularly by expanding into rural areas. The Islamic insurance market has grown due to more interest in shariah-compliant investments. The industry has experienced substantial growth after the Malaysian central bank issued takaful licenses to four established consortiums in 2006, which included HSBC, Malaysia’s Hong Leong Bank and Prudential Holdings. Malaysia currently has eight takaful operators and trusts that the inclusion of new insurance players would increase industry competition, pushing players not only to capture new market share but also to develop fresh takaful products. Similar to general insurers, the islamic insurance sector operates through correlation with macro economic performance; hence the positive outlook for the Malaysian domestic economy will affect the development of both sectors.

MTA chairman Datuk Syed Moheeb Syed Kamarulzaman reported: “The significant growth in retail credit financing, especially in relation to home financing in 2010, may be curbed to some extent in 2011 and this should encourage takaful operators to diversify their business focus away from financing protection products to agency driven products.”

Allianz Malaysia CEO Jens Reisch remarked that apart from the initial low insurance penetration rate in the country, increase in consumer knowledge, greater demand for retirement savings, together with growing Bancassurance and takaful businesses from a more liberalized insurance industry, are some of the other factors that would advance the insurance sector. Mr. Reisch added that Allianz: “is undertaking numerous initiatives to improve its distribution capabilities and we hope to continue to strengthen the top line and sustain profitability.”

Mr. Reisch highlighted that the major challenges facing the insurance trade would be the provision of long-term assets for packaging insurance products, the low interest environment for insurers failing to manifest attractive guaranteed return products and the requirement to offer high guaranteed products into the long term future.

The LIAM assert that global economic uncertainty could restrain the growth potential of the industry: “While it is an external factor, the quagmire prevailing in the established economies of the United States, Japan, Europe and the reaction of the local share market towards such sentiments may have an indirect impact on the industry. It can cause a slowdown on external demand that will eventually influence consumers in terms of decision-making, thus making sales more difficult.”

The association’s president, Md Adnan Md Zain, believes the best actions to take to overcome these peripheral obstacles would be through prudent domestic policies, active oversight, working closely with regulators and better integrating as an industry. The Life Insurance Association doesn’t discount the potential for inclusion of new foreign insurance players that could invigorate the market as well as the continued implementation of the financial inclusiveness programs undertaken by both the authorities and financial institutions.

Courtesy by: International News

Indonesia Islamic Insurance Assets Increased 47.6% in 2010

Indonesia Islamic Insurance Assets Increased 47.6% in 2010
By Suryani Omar - Mar 15, 2011 10:09 AM GMT+0500
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Business ExchangeBuzz up!DiggPrint Email .Indonesia’s Islamic insurance assets surged 47.6 percent to 4.5 trillion rupiah ($512 million) last year from a year earlier, Indonesia’s Capital Market and Financial Institution Supervisory Agency said.

Islamic insurance, or takaful, is based on the Koranic principle of mutual assistance where policy holders contribute a sum of money to a common pool managed by the company.

Premiums for the takaful sector rose 35.7 percent to 3.2 trillion rupiah in 2010 from a year earlier, Isa Rachmatarwata, head of the insurance bureau at the agency, said in a written response to questions.

Islamic insurance made up 2 percent of the total 224.9 trillion of insurance assets in the country, Rachmatarwata said.

Courtesy by: Bloomberg

Islamic insurance firm sees opportunity after Egypt crisis

DUBAI: Tokio Marine Middle East, an Islamic insurance services provider, sees an opportunity to expand its business in Egypt following the recent political turmoil, the company’s chief executive told Reuters.


Islamic insurance, or takaful, is already seeing demand in Egypt and the recent demonstrations will highlight the need for financial protection, said Ajmal Bhatty, president and chief executive of Tokio Marine Middle East, a unit of Tokio Marine Holdings.


“The awareness for insurance, especially personal insurance is generally low in regional markets including Egypt,” Bhatty said in an interview last week.


“Events such as the recent ones generally result in increasing the awareness in people that they need to do more about protection of their livelihood and assets.”


The unprecedented demonstrations captivated the world and led to the ouster of President Hosni Mubarak after a 30-year reign.


Tokio Marine launched two takaful companies in Egypt in January 2010. There are eight Islamic insurance providers in the country.


Bhatty said the industry expects to pay claims resulting from the turmoil.


The Japanese insurer said last year that it expected the two sharia-compliant units to generate about $3.5 million in annual premium income in the first financial year, which closes in June. That figure should increase to $136.4 million within 10 years, giving the Egyptian operations more than a one-fifth share of the takaful market in the country.



Islamic insurance, or takaful, is similar to mutual insurance but with a clear segregation of the assets owned by policy holders and those owned by the insurer.


The industry is expected to be a clear growth driver within the nearly $1 trillion Islamic finance industry over the next five years.


Tokio Marine is also considering launching micro-takaful operations in Egypt to complement microfinance programs already available.


Micro-takaful is an Islamic insurance scheme for people on low incomes who cannot afford insurance premiums. As part of a micro-credit scheme, a small amount goes to cover areas such as life, disability and accident insurance, as well as livestock cover or crop insurance against hazards of severe weather or flooding.


Bhatty said the company has already successfully provided conventional micro-insurance in India through a joint venture with a Japanese fertilizer company.


“We would like to explore microtakaful possibilities for Egypt as a good proportion of the society would benefit from it,” Bhatty said.

Courtesy by: Reuters

AIG, Mitsui expand in Malaysia

Malaysia is attracting global companies such as American International Group Inc and Mitsui Sumitomo Insurance Co seeking to tap growth in the country’s US$4 billion Islamic insurance market.

Mitsui Sumitomo said on Jan. 28 it’s in talks to buy a stake in a local operator offering takaful, or Shariah-compliant insurance. New York-based American International formed a joint venture with Alliance Bank Malaysia Bhd in January, four months after winning a licence from the central bank.

The entrance of more insurance firms will increase the pool of funds looking for longer-maturity debt in Malaysia as the government embarks on a 10-year, US$444 billion development program. Malaysia is giving tax incentives to foreign companies setting up takaful businesses and has eased ownership rules in domestic institutions to aid growth in the industry.

“Insurers are in the best market because of its depth and liquidity,” Mohd. Farid Kamarudin, who helps manage RM1.3 billion (US$428 million) of Islamic assets at Kuala Lumpur-based AmInvestment Management Sdn Bhd, a unit of the fourth-biggest underwriter of sukuk last year, said in a Feb. 7 interview. “This is the only market where you can buy sukuk with maturities of up to 20 years or 30 years.”




Ownership limits

Takaful accounted for 10.9 per cent of Malaysia’s total insurance market as of September, central bank Deputy Governor Mohd Razif Abd Kadir said in Kuala Lumpur on Jan. 28. In contrast, Islamic banking makes up 20 percent of the total banking industry.

Takaful is based on the Shariah principle of mutual assistance, where two parties agree to pay into a fund that will be used to assist each other in times of need.

Assets held by operators of Shariah-compliant insurance in Malaysia reached RM12.4 billion at the end of 2009, with RM3.52 billion raised in premiums, central bank data show.

Courtesy by: Business Times

Malaysia AIA AFG Takaful seeks new hires, eyes growth

The insurer, is owned by the Malaysian unit of AIA and Alliance Bank , will add to its current headcount of 25 as it looks to become among Malaysia's top three family takaful providers within three years, its chief executive Wan Azman Wan Mamat said.

"The potential is that immediately a start-up company like AIA AFG Takaful will have access to a very strong distribution and that will be the differentiator for the company in terms of the growth potential," AIA Bhd chief executive Khor Hock Seng told reporters after officially launching the company.

Wan Azman said Etiqa Takaful, which is owned by Mayban Fortis, a joint-venture between Malaysia's largest lender Malayan Banking and financial group Fortis , is Malaysia's biggest Islamic family insurer with about 25 percent market share. Prudential is second with about 16-18 percent share.

"Increasingly bancassurance is going to play a major part of our business," said Alliance Financial Group's group chief executive Sng Seow Wah.

"With this tie-up, I hope to be able to extend beyond the takaful business with AIA to do other bancassurance products which will extend to businesses."

The Islamic insurance industry's growth has been held back by a shortage of sharia-compliant instruments that insurers can invest in and some doubts about whether takaful really complies with Islamic guidelines.

The takaful penetration rate in mostly Muslim Malaysia was only 10.9 percent in September 2010. The Southeast Asian country has the world's second-largest takaful market and its total assets of $3.2 billion accounted for 26 percent of total global takaful assets in 2009, according to central bank estimates.

AIA AFG Takaful is one of four takaful companies that received licences from the Malaysian central bank late last year as the authorities look to accelerate the industry's growth.

Total takaful contributions could reach $7.7 billion a year by 2012, Ernst & Young has forecast. But global takaful contributions are less than 1 percent of the total insurance premium spend annually, industry lawyers Clyde & Co have said.

Courtesy by: Reuters

Takaful International goes online

MANAMA: Bahrain-based Takaful International, the pioneering takaful company in the region, on Sunday embarked on a new journey by introducing first of its kind service in Bahrain called e-takaful.

Being the first takaful company to offer on-line services at its portal www.etakaful.bh will immediately benefit both individual and corporate clients.

Announcing the innovative step, Essam Al-Ansari, general manager, during a press conference held at Takaful House in Seef District, said the company would continue to lead the way in takaful segment.

“We are just days away to kick start company’s branch operations in Doha, thanks to the company’s leadership and vision of the management to reach out all potential markets in the GCC,” Al-Ansari said.

“Everything is put in place for Doha operations and we just awaiting the license to open the first-ever Takaful International’s branch outside Bahrain,” he added.

“We have noticed the markets need for technologically advanced services that provides an effective, safe and easy insurance service process,” said Al-Ansari, who was joined by A. Aziz Al-Othman, deputy general manager and Ali Ebrahim M. Noor, deputy general manager family Takaful, healthcare and Takaful centers.

“The company continues to innovate and improve all its insurance products and services in order to ease all procedures for customers and keep pace with the current era” he added.

Abdul Aziz Al-Othman, deputy general manager of the company, said that the clients can obtain quotations for various services such as car, travel, home, domestic and marine insurance and other insurance services.

“It is also possible to obtain the documents electronically for renewal of all policies; with the possibility of reporting of claims as well as customer suggestions are welcome. Further features allow review of policies and claims and for updating personal data,” he added.

In addition, the customers can retrieve policy quotes in few minutes, by filling the form of the insurance service, and paying the premium through a protected Web page; after completing the form all data will be sent and the policy will be delivered to the insured in no time by express mail service (private) in any place within Bahrain.

“The Kingdom of Bahrain is at the top of the ladder of in terms of Internet penetration in the Middle East and the study indicates that percentage of Internet users have exceeded 32 per cent which is around 435,000 users. We strive to continue to provide the best services to our customers and this website is developed to serve them promptly and effectively, in addition to saving time and effort,” he added.

“As a lot of salvage coming out in many areas of takaful services, the customers can also benefit from out e-bidding portal by using online services and get the information of bidding even through SMS,” added Ali Ebrahim Noor.

Takaful International Company founded in 1989 offers variety of insurance coverage which is in line with the foundations of the Shariah and meets the requirements of this age. The company has received BBB rating with a long-term stable outlook from the Standard & Poor’s.

Courtesy by: Arab News

BNP’s Dalmau Discusses Challenges in Islamic Product Innovation

Rafael Dalmau, head of Shariah- compliant portfolio management at BNP Paribas in Singapore, discusses product innovation in an e-mailed response to Bloomberg questions.

On the drive for new products:

“The Islamic banking and financial sectors continue to evolve and part of that growth path involves the need to create new products. It is not always a lack of investment alternatives that motivate institutions to offer structured products. Many times, it is simply the need to keep pace with the demands of a more sophisticated client. Many of the traditional and basic definitions of Islamic financial transactions can be viewed already as structured products under conventional rules.

On setting standards for derivatives:

“The need to achieve global standards is not as urgent as thought of a few years ago. That is not to say, that it would not be useful and practical. There are still many challenges ahead of us before we can standardize Islamic derivatives. We, the market, need to define what it really means to have a derivatives market and whether or not, these transactions comply both in letter and spirit with Shariah principles.

“All market participants need to make clear what are the objectives behind the creation of Islamic derivative transactions? Are they going to be used simply to leverage or speculate on other Islamic markets, or are they going to be used for purposes of risk management? They can be abused as we saw in the recent times in the conventional markets.”

On the role of Islamic scholars:

“The scholars are going to be, and should be, the main drivers in the evolution of the Islamic derivatives markets. If there is ever an Islamic derivatives market that may allow more efficient risk management, it is likely to help in the growth of the Islamic capital markets. We are still far away from that point.”

Courtesy by: Bloomberg

Pakistan Funds Push for More Sukuk Sales to Invest Cash: Islamic Finance

Fund managers in Pakistan are urging the government to increase offerings of Islamic debt, saying a 13-fold rise in sukuk sales this year isn’t enough for them to invest inflows of cash.

The central bank plans to auction 45 billion rupees ($525 million) of three-year sukuk in the domestic market on March 1 and another 55 billion rupees in the three months ending June 30. The sales will take the total for the fiscal year to 189 billion rupees, compared with 14.4 billion rupees in the previous 12 months.

Pakistan’s Islamic banking assets climbed an average 30 percent annually in the past four years to 411 billion rupees as of June 2010, 6 percent of the financial industry’s total, according to a central bank estimate in October. Pakistan aims to double that share to 12 percent by 2012 and plans to issue two more Shariah banking licenses that will take the total to seven, the monetary authority said in October.

“The government has relied too much on the conventional debt market without realizing how much liquidity is in the Shariah-compliant industry,” Sajjad Anwar, who helps manage the equivalent of $187 million at NBP Fullerton Asset Management Ltd., a unit of the nation’s biggest lender National Bank of Pakistan, said in a Jan. 11 interview from Karachi. “Islamic funds and banks are just waiting.”

Banking Licenses

Pakistan needs to finance a budget deficit that may reach 6 percent of gross domestic product, or 1 trillion rupees this fiscal year, exceeding the government’s target of 4 percent, according to a report from the State Bank of Pakistan on Oct. 25. The shortfall was 6.3 percent last year, according to data on the Finance Ministry’s website.

The yield on the three-year debt will rise to 13.89 percent from 13.39 percent at the prior offering on Dec. 13 as the central bank may increase interest rates to temper inflation, said Karachi-based Abdullah Ahmed, treasurer at Meezan Bank Ltd., the nation’s biggest Shariah-compliant lender.

“In an environment when everyone is expecting a hike in interest rates, the demand for such paper will remain high,” Ahmed said in an interview on Jan. 12. “Islamic banks are desperate to deploy their funds.”

Inflation stayed above 15 percent for a fourth month in December after unprecedented floods in August destroyed roads and damaged crops worth $3.3 billion.

Inflation to Slow

“The inflation rate will start falling from next fiscal year to average 13 percent as the government aims to reduce borrowing and impose additional tax measures,” Mohammed Sohail, chief executive officer at Topline Securities Ltd., said in an interview yesterday from Karachi.

The State Bank of Pakistan increased its discount rate by half a percentage point to 14 percent on Nov. 29, the third policy tightening since July. The central bank has raised borrowing costs from a record low 7.5 percent in 2005. Policy makers will increase the rate by 50 basis points to 14.5 percent at the Jan. 29 meeting, according to Meezan Bank’s Ahmed, who said he will buy sukuk at the next auction.

Pakistan’s central bank uses the yield on its six-month non-Islamic treasury bills as a benchmark for pricing debt. The yield rose to 13.55 percent at a sale on Jan. 12, nine basis points more than the previous offering. The rate was 12.05 percent a year ago, Bloomberg data shows.

Global sales of sukuk, which pay asset returns to comply with the religion’s ban on interest, fell 15 percent to $17.1 billion in 2010, according to data compiled by Bloomberg. Issuance reached a record $31 billion in 2007.

Islamic Debt Returns

Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in developing markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The difference between the average yield for emerging- market sukuk and the London interbank offered rate shrank eight basis points this month to 281, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Average yields dropped 13 basis points to 4.61 percent.

The yield on Malaysia’s 3.928 percent sukuk maturing in June 2015 rose two basis points to 2.8 percent today, according to prices from Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed one basis point to 330 today, Bloomberg data show.

Government Debt Sale

The government sold 37.2 billion rupees of Islamic securities on Dec. 13 and got orders for 57.7 billion rupees. At the previous sale on Nov. 8, it raised 51.8 billion rupees after receiving offers of 64.7 billion rupees. Pakistan had local- currency debt of 5.35 trillion rupees outstanding, including 94 billion rupees of sukuk as of November 2010, according to the central bank’s website.

Pakistan is attracting investors even as the country battles an eight-year insurgency with militants in its border region with Afghanistan. The U.S., a major financial donor, is pushing President Asif Ali Zardari to intensify that crackdown. A policeman assassinated secular politician Salman Taseer on Jan. 4 for opposing an Islamic blasphemy law.

Albaraka Banking Group BSC, Bahrain’s biggest publicly traded Islamic lender, boosted its branch network to 90 after acquiring Pakistan’s Emirates Global Islamic Bank Ltd. in 2010. Meezan Bank, controlled by Kuwait’s Noor Financial Investment Co., plans to open 225 new outlets in the next four years.

The central bank predicts the economy will expand 2.5 percent this fiscal year, faster than last year’s 1.2 percent. The Karachi Stock Exchange KSE100 share index reached a 2 1/2- year high today. The gauge rallied 28 percent last year after soaring 60 percent in 2009.

“For Islamic banks, sukuk will remain attractive because the sovereign notes offer the least risk and high returns,” Pervez Said, chief executive officer of Dawood Islamic Bank, 35 percent owned by Bahrain’s Unicorn Investment Bank BSC., said in an interview yesterday from Karachi. “Political and security problems have always been associated with Pakistan. The issue is where do we invest?”

Courtesy by: Bloomberg

U.K. Cancels Sukuk, Focus on Economic Growth: Islamic Finance

The U.K., Europe’s largest market for Shariah-compliant financial products and services, canceled what would have been the first sale of sovereign Islamic bonds by a Western federal government as issues fell 15 percent in 2010.

“The U.K. government has decided not to issue sovereign sukuk because it is judged not to provide value for money,” a spokesman for the U.K. Treasury in London, said in an e-mailed response to questions Jan. 13. “It will keep the situation under review.” The Treasury has been mulling the sale of Islamic bonds denominated in pounds since at least April 2007.

Growth in Europe’s Islamic financial hub has been hampered by slowing economic expansion and the government’s attempt to plug a budget deficit, according to Moody’s Investors Service. The German state of Saxony-Anhalt became the first European borrower to sell bonds adhering to Islamic law in August 2004 with 100 million euros ($134 million) of five-year sukuk, according to data compiled by Bloomberg.

“This will discourage other governments from selling sukuk,” John A. Sandwick, a Geneva-based Islamic wealth and asset management consultant who advises companies and governments in Asia, Europe and the Middle East, said in a telephone interview Jan. 13. “If the U.K. says that sukuk aren’t value for money, it’s likely other governments may reassess their positions, and the number of sovereign issuers new to Islamic finance may drop.”

‘Costs Outweigh’

Global sales of Shariah-compliant bonds, which are based on the exchange of asset flows rather than interest, dropped to $17.1 billion last year. Issuance reached a record $31 billion in 2007. Kazakhstan, the former Soviet republic that last sold international debt in 2000, delayed plans to offer sovereign Islamic bonds because the government doesn’t need the funds, Deputy Prime Minister Aset Issekeshev said at a conference in Abu Dhabi yesterday. Luxembourg may sell sukuk, central bank Governor Yves Mersch said in Bahrain in May.

The U.K. Treasury ordered a study in April 2007 into the possibility of issuing Islamic bonds. The government introduced tax concessions for the debt in its annual budget in 2007 and authorities extended tax breaks to Islamic mortgages in 2003. The Treasury last July reiterated the previous government’s 2008 position that a sovereign sukuk sale, which would provide a benchmark for issuance, didn’t offer “value for money.”

“The government recognizes the benefits of the product for the Islamic banking sector, but believes that the costs outweigh the benefits relative to the issuance of gilts,” the Treasury spokesman said.

Cheaper Borrowing

Britain is currently borrowing at a rate that is lower than the London interbank offered rate, or Libor, according to Bloomberg asset swap calculation. If investors swap the fixed- rate offered by 10-year gilts into a floating rate, the security yields 2.9 basis points below Libor, the data show.

The yield on Dubai’s 6.396 percent sukuk maturing in November 2014 dropped 2 basis points to 6.16 percent on Jan. 14, according to Bloomberg data. The extra yield investors demand to hold Dubai’s government debt rather than Malaysia’s narrowed eight basis points, or 0.08 percentage point, to 330 this month, the data show.

“The U.K.’s initial drive to issue sukuk was more politically and socially driven versus economic given the significant Muslim minorities in the country,” Khalid Howladar, a Dubai-based senior credit officer at Moody’s, said in an e- mailed response to questions Jan. 12. “Given recent stresses on the economy and government finances, such motives are now secondary to the need to raise funds efficiently.”

About 2.9 million people in the U.K. are Muslim, the Washington-based Pew Research Center’s Forum on Religion & Public Life said in a report this month. It has a total population of 62.3 million, according to 2010 estimates from the U.S. Census Bureau on Dec. 28.

Slowing Growth

U.K. economic growth slowed more than initially estimated in the third quarter. Gross domestic product rose 0.7 percent from the previous three months, the Office for National Statistics said Dec. 22 in London. That compares with an initial estimate of 0.8 percent and second-quarter growth of 1.1 percent. The Bank of England on Jan. 13 maintained emergency stimulus for the economy.

“The U.K. government is in retrenchment mode and is not looking to expand the sphere of its activities,” Frances Hudson, who helps oversee about $220 billion as head of global thematic strategy at Standard Life Investments in Edinburgh, said in an e-mailed response on Jan. 13.

Corporate Sales

European companies may still turn to the Middle East. The region has more than 400,000 millionaires, Cap Gemini SA and Bank of America Corp.’s Merrill Lynch unit said in a world wealth report last June. Their combined wealth grew 5.1 percent in 2009 to $1.5 trillion, the report said.

The Bank of London and The Middle East Plc, a Shariah- compliant bank, is in discussions with two U.K.-based companies to sell as much as 200 million pounds of Islamic bonds in the next six months, Nigel Denison, director and head of markets at the London-based bank, said in an interview in Manama, Bahrain Nov. 24.

“It’s disappointing that they’re not looking at it more actively because we feel it would provide value for money,” Denison said in a telephone interview from London Jan. 14. “The fact that it’s still under review is encouraging.”

Global Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in emerging markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

Gatehouse Bank Plc, a London-based Islamic investment bank, will help two companies sell as much as 200 million pounds of sukuk in the first quarter of this year, Chief Executive Officer Richard Thomas said in Manama Nov. 23. International Innovative Technologies Ltd., a clean energy company in Gateshead, sold a $10 million, four-year convertible sukuk in July, the country’s first corporate Islamic bond.

“A lot of dithering, dithering, dithering, then nothing,” Sandwick said. “The sukuk market would’ve been deeply enriched and rewarded with a U.K .sovereign or a government municipal issuance. It’s a sad day for everyone.”


Courtesy by: Bloomberg