CIMB applies for Thai Islamic licence

The central bank of Thailand has received about 10 applications to set up stand alone Islamic banks in the country, including one from Malaysia, said Islamic Bank of Thailand (IBT) president Dheerasak Suwannayos. The other applications are all from Middle East nations such as Kuwait, Qatar and United Arab Emirates. (The Malaysian Reserve, July 12, 2010, p1)

Exploring opportunities in wake of credit crunch

CAPTION: Get the inside scoop from (clockwise from top left) Dheerasak, Badlisyah, Issam and Mohamad Nedal at the 5th International Islamic Finance Forum 2009 Asia

by Habhajan Singh
Opportunities for Islamic finance in the wake of the credit crunch and managing distressed assets will be among the topics discussed at an Islamic finance forum later this month that will see the presence of the Accounting and Auditing Organisation for Islamic Financial Institutions's (AAOIFI) key man.
AAOIFI secretary general Dr Mohamad Nedal Alchaar is scheduled to present a keynote address on the opportunities for Islamic finance in the wake of the credit crunch at the 5th International Islamic Finance Forum 2009 Asia that begins on June 29.
Among others, he will be discussing the impact of the financial crisis on Islamic finance and synergies between Islamic finance and conventional finance. He will also address the need to strengthen the Islamic finance infrastructure and systems.
AAOIFI is the Bahrain-based standard setting body active in developing and promoting Islamic accounting, auditing, and Shariah standards. It plays a crucial role in coming out with standards for Islamic financial institutions globally, though not all regulators around the world implement its pronoucements.
The two-day forum will also present an international case study on distressed assets or sellers for Islamic investments.
Rasameel Structured Finance vice chairman and chief executive officer Issam Zaid Al-Tawari will guide participants through the distressed asset market to search for potential for investors and to see if the assets can be managed in a Shariah-compliant manner. He will also be looking at the challenges and risk appetites faced when structuring Islamic funds for distressed assets. Headquartered in Kuwait, Rasameel's primary focus is providing a Shariah-compliant portfolio of predictable cashflow generating assets and securities in the form of asset securitisation to its clients invested in structured Islamic investment products.
On Feb 19, The Malaysian Reserve had reported that Malaysian Shariah advisory body Amanie Business Solutions Sdn Bhd, led by Dr Mohd Daud Bakar, was advising a number of fund managers from the United States and the Middle East who are keen on managing distressed assets in a manner compliant with Shariah. This is another new innovation being injected into the fast growing field of Islamic finance.
According to the report, these fund managers, believed to have an estimated average fund size of US$500 million (RM1.83 billion), were keen on picking up distressed assets following the economic downturn to form funds that will be used to tap Islamic investors.
"We've been approached to structure products to enable the fund managers to launch their funds. They want to structure Islamic funds for distressed assets," Dr Mohd Daud was reported as saying.
Dr Mohd Daud, a Shariah scholar and chairman of Bank Negara Malaysia's Shariah Advisory Council, is also scheduled to speak on the risk return potential of derivatives and hedge funds in the Islamic finance market.
Other panelists for the event are CIMB Islamic Bank Bhd executive director & CEO Badlisyah Abdul Ghani, Deutsche Bank global head of Islamic distribution Salman Ashraf and Islamic Bank of Thailand (IBT) president Dheerasak Suwannayos, who will speak on the Thai experience of operating in a market with minimal Islamic finance infrastructure.
Neighbouring Thailand has made a number of moves to open the doors to Islamic finance, including setting up the IBT in 2003 with the Thai Finance Ministry as the largest shareholder with a 48.54% stake in the bank.
In February, it was also reported that Thailand was planning to ease taxation rules to support the development of an Islamic bond market that enables local companies and banks to tap new investors.
In the same month, the Stock Exchange of Thailand (SET) had announced plans to launch a Shariah 50 index early in the next quarter before going on a roadshow to the Middle East in the second half.
The index would combine 50 listed stocks, making up 47% of the SET's market capitalisation, that are compatible with Islamic law, according to media reports.

(This story appeared in The Malaysian Reserve on June 8, 2009. 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)

Thailand lures Middle East investment with companies free of pork, booze and usury

BANGKOK — To court Muslim investors, Thailand’s business world is showcasing firms the prophet Mohammed could condone.
The Stock Exchange of Thailand, currently in a tailspin, is hoping to attract moneyed Muslims in the Middle East and in its own backyard. Their pitch, however, doesn’t just rely on promises of high returns. These firms, the exchange says, will benefit Muslims’ bottom line — and their conscience as well.
Debuting next month, Thailand’s “Sharia Index” is a selection of firms vetted by scholars who can navigate both the Qur’an and a balance sheet. Each has been deemed free from violations of Sharia, or Islamic holy law. Companies connected to pork, tobacco, booze — or even the defense industry — are immediately disqualified.
Then comes the hard part. Real expertise is needed to weed out businesses that violate the Sharia’s prohibition on excessive interest. Known as “riba” in the Qur’an, it’s comparable to the Judeo-Christian concept of “usury.” Avoiding interest is the foundation of Islamic financing.
“Dabbling with ‘riba’ is a large sin,” said Habhajan Singh, who tracks Islamic finance trends for The Malaysian Reserve newspaper, where he is associate editor. “For Muslims to partake in the modern financial world, they have to remove that element of interest.”
The vetting process eliminates any business that profits from interest — such as banks — in favor of companies profiting from concrete assets.
The idea has made its way into the modern financial world. Thailand’s stock exchange follows exchanges in Singapore and Hong Kong in offering an Islam-vetted stock index. Its new Sharia index will be calculated by the U.K.-based FTSE group.
Santi Kiranand, who heads market development for Thailand’s stock exchange, said the Sharia index is mostly a push for more wealthy Middle East investors. But it also opens doors for investors in Muslim-majority Malaysia and Indonesia.
Though predominately Buddhist, Thailand also is home to many Muslims, though most are concentrated in poorer southern provinces along Malaysia’s border.
“Even though we have a lot of Muslims, and they should be our targets too, we have to diversify our investor base into those other regions of the world,” Santi said. “The Middle East doesn’t invest enough in our capital market.”
Santi and a small team are currently planning a “road show” through the Middle Eastern financial centers Qatar, Abu Dhabi and Dubai, he said.

REST of the story, see GlobalPost (March 5, 2009)

THAI: IBT to raise up to RM724m via Sukuk

BANGKOK • The Islamic Bank of Thailand (IBT) plans to raise between US$70 million to US$200 million (RM724.82 million) via Sukuk Islamic bonds in Malaysia and Middle East countries by this year.
Malaysia's second largest banking group CIMB, and its newly acquired BankThai, had approached the IBT to launch the Sukuk bond in Malaysia.
IBT chairman Professor Somchai Virunhapol said this would be the first time Thailand was issuing Sukuk bonds, adding that other targeted countries besides Malaysia were Kuwait, Bahrain and the United Arab Emirates (UAE).
"We have already held talks with CIMB on the scope of cooperation, but no figures have been discussed as yet. Similarly, we received very good response from the Middle East countries during our visit there a month ago," he said on the sidelines of the Third Thailand Islamic Finance Conference on Mar 26.
According to reports, in 2007 alone, CIMB arranged more than US$4.96 billion worth of Islamic bonds globally, equivalent to 16% of the world market, and of which US$4.67 billion was issued in Malaysia.
The global Islamic financing products are estimated at US$1 trillion (RM trillion), with annual growth of between 10% to 15%. Somchai said there was big potential for Sukuk bonds and other Shariah compliant financing products in the country.
The Thai government, he added, had estimated that about 20% of financing for a projected US$100 billion investment in mega projects over the next ten years, would come from such financing products.
About 50% of the investment is expected to go towards the transportation sector, namely for the construction of new railway tracks and trains, subway lines and airport, as well as 25% each for the energy and other sectors. According to Somchai, even though the world was experiencing an economic crisis which had affected the conventional financing system, the Islamic bond market remained strong, especially in the cash-rich Middle East countries.
He also said that the IBT planned to open three new branches this year from its current 26, adding that it currently has over 100,000 savings account holders.
"There are about eight million Muslims in Thailand and we are tapping a niche market with very big potential," he explained.
Somchai, however, said that the Thai Finance Ministry had to waive taxes such as the specific business tax and capital gains tax before Sukuk bonds could be issued.
The IBT was established in 2003 to offer financial services in compliance with Islamic law and to serve the country's Muslim population. The Thai Finance Ministry is the largest shareholder with a 48.54% stake in the bank. — Bernama (Mar 26, 2009)

Thailand plans to ease tax rules to support bond sales

THAILAND is planning to ease taxation rules to support the development of an Islamic bond market that enables local companies and banks to tap new investors. The Finance Ministry will finish reviewing existing tax issues within the next month, said Pongpanu Svetarundra, director general of the Public Debt Management Office, Bloomberg reported on Feb 25.
Thai Airways International Pcl, the nation’s largest carrier, may be the first company to sell Islamic bonds once new rules are in place, he said. Thailand is seeking to tap into Muslim wealth through an Islamic financial market that has also attracted Singapore, Hong Kong, Japan and the UK, the report said.
The UK government in 2007 introduced tax concessions for Islamic bonds. Malaysia accounted for more than 37% of global Islamic bond sales last year, central bank governor Zeti Akhtar Aziz said on Feb 24.
The wire service reported that Pongpanu didn’t provide details on the tax changes for Islamic bonds, adding taht in 2003, UK authorities scrapped a rule that taxed Islamic home loans twice, giving Muslim homeowners the same tax treatment as in conventional financing.

Thai SET to launch Shariah 50 index

The Stock Exchange of Thailand (SET) is planning to launch a Shariah 50 index early next quarter before going on a roadshow to the Middle East in the second half, reports a Thai newspaper.
The index would combine 50 listed stocks, making up 47% of the SET's market capitalisation, that are compatible with Islamic law, reports The Nation.
It quoted Santi Kiranand, head of market development, as saying that SET and FTSE have jointly developed the Shariah index while the selection of the 50 firms was performed by the Yasaar Committee.
The roadshow would touch down in Qatar, Dubai, the United Arab Emirates and Abu Dhabi, with the aim to attract petrodollars from the Middle East to the SET.
"Many countries in Asia have been active in launching Shariah indexes including Singapore, Hong Kong and Taiwan," Santi said. Just over two years ago, Bursa Malaysia Bhd (Bursa Malaysia), in collaboration with global index provider FTSE Group (FTSE) launched the FTSE Bursa Malaysia EMAS Shariah index on Jan 22, 2007.
The index was designed to provide investors with a broad benchmark for Shariah compliant investment for the Malaysian market. When launched two years ago, it took the constituents of the FTSE Bursa Malaysia EMAS Index, which has been free float weighted and liquidity screened, and overlays the Securities Commission's Shariah Advisory Council's (SAC) screening methodology to derive an 'investable and transparent' Shariah compliant index.
As at Nov 28, 2008, there were 855 Shariah compliant securities as determined by the Shariah Advisory Council (SAC) of the Securities Commission (SC). This represented 87% of the total listed securities or 64.3% of the market capitalisation on Bursa Malaysia.
In neighbouring Bangkok, the newspaper reported that at least two or three asset management companies have shown interest in launching funds investing in stocks in the Shariah index. One operation thought behind the launch of the fund is to position it as a product that asset management companies could use to draw funding from investors in the Middle East.

(This story appeared in The Malaysian Reserve on Feb 25, 2009. 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)