Thursday, January 28, 2010

KFH scale down Singapore operations

by Habhajan Singh
Kuwait Finance House (KFH) has scaled down drastically its Singapore operations just over a year after opening the subsidiary to tap into the region’s fund management scene, sources say.
It is understood that the regional operations for the Islamic bank’s fund management act ivit ies in the island-state would be brought back to Kuala Lumpur and handled directly by Kuwait Finance House (Malaysia) Bhd. In May 2008, KFH Malaysia had announced that its wholly-owned subsidiary, Kuwait Finance House (Singapore) Pte Ltd that it had received the go ahead from the Monetary Authority of Singapore (MAS) to commence its fund management activities. It is understood that the Singapore operations, manned by about a dozen staff, had been reduced to just one staff.
"I think they have been a little impatient with the results from their Singapore operations. Perhaps they had expected a little too much, too soon," an executive at an Islamic bank told The Malaysian Reserve.

This is just one of the recent apparent bumps in the operations of the Kuwaitibased Islamic outfit. In mid-December 2009, KFH Malaysia had pulled out from a RM920 million deal to purchase 50% of Menara YNH from YNH Property Bhd’s unit.
In a statement on Dec 15, YNH had told the stock exchange that KFH Malaysia had informed it ‘in writing’ on that matter, and that it may seek damages from the Kuwait-based Islamic bank. In an emailed statement a day later, KFH Malaysia had said that that there was "no legally binding agreement between KFHMB and YNH Land Sdn Bhd." Explaining the rationale of the move, KFH Malaysia had informed its staff that KFH Asset Management Sdn Bhd (KFHAM), which was established in 2008, would "act as the strategic platform for the KFH Group for Asia Pacific".

In the memo, seen by The Malaysian Reserve, KFH Malaysia said: "As such, this consolidation exercise will affect the KFH Singapore office, since there is a duplication of business functions. We have had to make a painful decision in the employee and resource realignment in Singapore, and to minimise our workforce at the KFH Singapore office.
"The move is a necessary adjustment to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency. With the KFH Singapore decision, we optimise our employee deployment."
The bank also told its employees that the company had appointed a ‘reputable outplacement company’ to assist affected employees to find news jobs who, it added, were give ‘severance pay and other benefits’ which were ‘beyond the legal requirements’.

On the decision to eliminate jobs, the internal memo stated that it was ‘crucial’ to its ability to adjust the bank’s cost structure, so that we have the resources to drive future profitable growth’.
The memo, dated Dec 12, 2009, was signed by chairman Shaheen Al-Ghanem and acting CEO Ab Jabar Ab Rahman. In a statement when the Singapore subsidiary was established, Shaheen had said that the move the establishment of KFH operations in Singapore was a ‘testament of our commitment in the Asia-Pacific region’.

(This story appeared in The Malaysian Reserve on 18 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

‘Shariah Court has no jurisdiction’

by Bhupinder Singh Kuala Lumpur High Court Justice K Anantham last Friday ruled that Shariah Courts had no jurisdiction over corporate entities in a case involving the children of the late Tan Sri Syed Kechik Syed Mohamed Al-Bukhary, according to media reports. He made the ruling on an application by sisters Sharifah Zarah and Sharifah Munira to set aside the injunction obtained by their brother, Syed Gamal, at the Kuala Lumpur Shariah Court on Sept 14, 2009, to stop the sale or liquidation of his 44% stake in Syed Kechik Holdings Sdn Bhd.
The three offsprings of the late businessman have gone to court to fight over the RM400 million estate he left behind upon his passing at the age of 81 in April last year.
According to reports, Syed Gamal said he would appeal against the decision and continue to pursue his rights according to 'Faraid' law when met by reporters outside the courtroom. The late Syed Kechik was the father in law of the billionaire businessman Tan Sri Syed Mokhtar Al-Bukhary, who controls the nation's rice and sugar business and also is chairman of the Al-Bukhary Foundation. Among others, during his lifetime, Syed Kechik had served as Legal Adviser to then Sabah Chief Minister from 1968 until 1975.
Syed Kechik was also political secretary to then Information and Broadcasting Minister Datuk Senu Abdul Rahman from 1964 to 1965. Syed Kechik left behind a wife, Puan Sri Sofiah Abdullah, three children and 12 grandchildren.

(This story appeared in The Malaysian Reserve on 19 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Dubai Group to sell Bank Islam stake

by JASON NG Dubai Group LLC, an investment firm of the Dubai ruler, is eyeing to sell its stakes in Bank Islam Malaysia Bhd at an indicative RM1 billion, marking the exit from its major investment in Malaysia.
It is learnt that the proposed divestment, which had been mooted even before the Dubai debt crisis last year, would be completed by June this year as the unidentified buyer is now near completion of its due diligence, according to sources close to the negotiation.
"The debt crisis in Dubai has, in some ways, put the sale on fast track," the source who declined to be identified due to the sensitivity to all negotiating parties told The Malaysian Reserve recently. Officials of both BIMB Holdings and Bank Islam could not be reached for comment at press time.
Dubai Group presently owns about 30.5% stake after it opt out of a preference shares issuance exercise of Bank Islam, a unit of BIMB Holdings Bhd, as plans for the proposed divestment was already in place then.
"There is a process running and we expect the sale to be done over the next few months," Rothschild Malaysia Sdn Bhd managing director/CEO Piers Willis said separately when contacted. Rothschild is the sole financial advisor to Dubai Group.
Back in 2006, Dubai Group had bought 40% of Bank Islam via its unit Dubai Investment Group LLC for RM828 million, edging out Bahrainbased investment bank Unicorn Investment Bank BSC and Oman’s largest financial services provider BankMuscat SAOG.
The proposed divestment is part of a ‘strategic review’ program by Dubai Group and is ‘irrespective’ of the debt crisis in Dubai, Willis said. He declined to comment further.
Bank Islam had suffered a RM1.3 billion loss after tax at the end of 2006 before turning around a year later with a RM232.46 million net profit.
Dubai, one of the sevenmember state under United Arab Emirates, and its investment arm Dubai World were under intense media spotlight since December 2009 after it sought a standstill on some US$22 billion (RM73.5 billion) of debts.
Fellow emirate Abu Dhabi had since come to the rescue with a US$10 billion bailout to help Dubai World pay off the debts while restructuring exercise that may include the sale of its asset worldwide is being carried out.

(This story appeared in The Malaysian Reserve on 4 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Islamic unit trusts resilient during crisis

by Lee Cherng Wee Barely three weeks into the new year, two unit trust funds have been launched and coincidentally both funds are Islamic-based funds. CIMB-Principal Asset Management got the ball rolling by launching it Islamic global commodities equity fund. It was followed by Public Mutual Bhd which introduced the Public Islamic Asia Leaders Equity Fund to tap the growth potential of middle to large capitalised Shariah compliant stocks within regional markets.
The resilient performance of local Shariah funds throughout the global meltdown could be the reason why bot h t he f u nds launched so far this year are Islamic-based. According to the Securities Commission (SC), the total net asset value (NAV) of Islamic-based funds have been steady around RM16 billion to RM17 billion throughout 2008 while net asset value (NAV) of its conventional counterpart fell 23.7% to RM134.41 billion. When the unit trust industry rebound in 2009, Islamic funds rode the recovery as well.
The total NAV of all local funds started rising from RM137.56 billion in March 2009 to hit RM193.2 billion in November 2009 surpassing its previous peak of RM170 billion in January 2008. During the same period, the NAV of conventional funds grew 43.7% to RM169.19 billion while Shariah funds added 25.6% to RM21.34 billion.
Putting the worst behind, fund houses are set to tap investor optimism in unit trusts with the launch of more funds this year. There were 28 funds launched last year compared to 54 funds launched in 2008 as fund houses held back on poor investor confidence. As of November 2009, there were 545 unit trust funds in the market with 400 conventional funds and 145 Shariah funds.
The unit trust industry's total NAV is equivalent to 19.6% of Bursa Malaysia's market capitalisation.
"According to fund houses, a lot of funds are being lined up and more funds will be launched this year. Investor sentiment has improved in the last six months and people are starting to put money back into unit trust," said Dennis Tan, MD of iFAST Capital Sd Bhd, a wealth management portal. Tan added that iFAST has seen pick up in sales through its webportal and financial advisors.
"We are not back to the top but it's far better than the first half of 2009," he said.
On 2010's outlook, Tan said in the first half of this year, investor confidence is there but it may be more challenging in the second half. In the next few months, iFAST will embark on a roadshow to market its portal. With investor confidence returning, Tan said it is good timing to promote its portal which offers competitive rates and research tools.

(This story appeared in The Malaysian Reserve on 20 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

Insurers jostling for family takaful licences

by Habhajan Singh
Keen competition is expected between a number of local insurers to land the two family takaful operator licences up for grabs, with some insurers already hiring key people to boost their chances.
Industry sources say as many as eight insurance companies are already at various stages of their preparation to lobby for the licences.
The players are showcasing their worth to get a foot into the lucrative market which saw a total income of RM2.83 billion in 2008, more than double the RM1.22 billion just four years earlier.
"Some of them are going about it as if they are sure to land the licence. This has made some people at the central bank a little uncomfortable," said one takaful executive.
Based on conversations with industry players and previous announcements, among the insurers keen on getting the family takaful operators licence include country’s largest life insurers Great Eastern Life Assurance (Malaysia) Bhd, American International Assurance Bhd (AIA Bhd) and Manulife Holdings Bhd.

In a recent interview, Malaysian Takaful Association chairman Datuk Syed Moheeb Syed Kamaruzaman said players keen to get the licence will have to present a strong business plan.
"That would be the uppermost on Bank Negara’s agenda — to make sure that Malaysian takaful is exported and flourish aboard. "We hope that the two companies who will get the licence will pave the way to the other companies," he said.
Right now, according to another takaful executive, except for Takaful Malaysia who has full operations overseas, the others have not been able to put in place a plan that will take them abroad.
As part of the announcement on the liberalisation measures for the financial sector announced in April 2009, it was announced that Bank Negara Malaysia (BNM) would issue two new licences for Islamic banking with a minimum paid-up capital of US$1 billion and up to two new licences for family takaful.
In its statement in April 2009, BNM said the new family takaful operator will be registered under the Takaful Act 1984 and will have a minimum issued and paid-up capital of RM100 million.
In assessing the merits of the applications, the first criteria adopted is that the applicant must be a reputable regulated institution or a shareholder of a reputable regulated institution The second reads as follows: "The applicant must demonstrate, through a comprehensive business plan, that the proposed new licensed institution to be established in Malaysia or the foreign partner intending to acquire equity interest in an existing domestic Islamic bank, needs to have necessary expertise and resources that can tap the global Islamic financial market and contribute to reinforce Malaysia's position as an international Islamic financial hub."
The winners will join other takaful players like Syarikat Takaful Malaysia Bhd, Etiqa Takaful Bhd and Takaful Ikhlas Sdn Bhd.
Takaful Malaysia, which already has a presence in Indonesia, has been invited to provide technical support to a financial institution in the Middle East and is considering the move as a stepping stone into the West Asia region, its group managing director Datuk Mohamed Hassan Kamil said in November 2009. The company has about 34 branches in Indonesia and about 56 branches locally.
Asked if existing takaful players are concerned with more new players, Syed Moheeb said that from the industry perspective, the penetration rate for takaful is only at 7% compared to conventional insurance which is at 30%.
"There is enough business for everyone. The more important thing is that we need to get more people joining takaful. Currently, the rural market is very much left untapped," he said.

(This story appeared in The Malaysian Reserve on 4 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

PPZ sees 17% rise in 2009 zakat collection

The zakat authorities for the Federal Terriroties (FT) collected zakat worth RM241.97 million last year, a 17% increase from RM206.26 million in 2008. Pusat Pungutan Zakat (PPZ) MAIWP also saw an increase in the number of people paying zakat.
Last year, 78,820 people were listed as zakat payers, compared to 67,872 in 2008. In a statement, PPZ said the total zakat collection for 2009 surpassed its RM230 target by 5%.
PPZ, established by the Federal Territory Islamic Religious Council, which is better known locally by its Malay acronym MAIWP. In terms of categories, income zakat was the highest, contributing RM167.48 million or 69% to the total collection. This was followed by business zakat (RM29.11 million), asset zakat (RM25.69 million) and zakat on savings (RM18.37 million).
At a press conferece yesterday to announce the results, Minister in the Prime Minister's Department Senator Mej Gen Datuk Jamil Khir Baharom announced that the target set for PPZ's zakat collection for 2010 is RM250 million.
Jamil, who is also MAIWP chairman, said that there were fears that the collection could take a beating due to the economic slowdown last year. On the contrary, he said the increase in zakat collected indicated an increased awareness amongst Muslims on the importance of paying zakat. He also noted that the zakat authority was able to announce its results so soon after the clear-end was proce of the effectiveness of its integrated zakat information technology system called Sistem Integrasi Zakat (Siza).
Looking at the numbers, Jamil noted that December was the most active month with PPZ recording a total collection of RM49.21 million. In 2009, 75 zakat contributors paid more than RM100,000, a slight drop from 81 people in 2008. There were 131 in band between RM50,000 and RM99,999 and 513 people for RM20,000 to RM49,999.
In his speech, PPZ chairman Datuk Mustafa Abdul Rahman said the zakat collector had managed to rope in 18,552 new zakat contributors who paid RM25.52 million.
However, he also noted that 12,786 who paid zakat in 2008 had yet to fulfil their obligations in 2009, probably due to death, change of address or that they did not fulfil the conditions to be eligable to pay zakat.
"2010 and the following years are challenging years ahead for PPZ," he said. PPZ, set-up via a company named Hartasuci Sdn Bhd, is placed under a foundation cal led Yayasan Taqwa Wilayah Persekutuan and is controlled by MAIWP.

(This story appeared in The Malaysian Reserve on 8 Jan 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)