beyond sovereign issuers: strategies to facilitate the...
TRANSCRIPT
Beyond Sovereign Issuers: Strategies
to Facilitate the Sukuk Market to a
Broader Pool of Issuers
- The Malaysian Experience
Ruslena Ramli
Head, Islamic Finance
RAM Rating Services Berhad
The World Islamic Banking Conference
4 June 2015, Singapore
Slide 2
Table of Contents
The Malaysian Bond Market 3
Facilitative Strategies for Market Development 7
Outlook for the Global Sukuk Market 12
Role of Credit Rating Agency 14
Slide 3
1The Malaysian Bond Market
64.3
152.5 11.0
164.8
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
-
50.0
100.0
150.0
200.0
250.0
300.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Malaysian Total Bond Outstanding vs Sukuk Outstanding(Source: BNM as at Dec 2014 & RAM Ratings)
Sukuk Outstanding Conventional Outstanding Sukuk Outstanding (in % Total)
35.7
185.0
33.0
130.5
0.0
20.0
40.0
60.0
80.0
100.0
120.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Private Sector Public Sector Total (in % GDP)
Slide 4
Overview of the Malaysian Bond Market
USD billion (%)
Malaysian Total Bond Outstanding by Public and Private Sector(Source: Asian Bonds Online as at Dec 2014 & RAM Ratings)
USD billion (%)
Note: Differences in amounts due to different sources
Sukuk from Malaysia Sukuk from GCC Others Total
2012 103.02 24.89 11.14 139.05
2013 80.94 26.44 10.93 118.31
2014 77.27 23.31 15.65 116.23
As at end-April 2015 13.76 6.45 4.79 25.01
-
50.00
100.00
150.00
US
D b
illi
on
3-year Global Sukuk Issuance Trend by Region(Source: Zawya & RAM Ratings)
Sukuk Issuance by Region and Type of Issuer
SovereignQuasi
SovereignCorporate Total
2012 94.77 19.89 24.39 139.05
2013 77.35 8.53 32.44 118.31
2014 73.22 17.70 25.31 116.23
As at end-April 2015 12.63 7.66 4.72 25.01
-
50.00
100.00
150.00
US
D b
illi
on
3-year Global Sukuk Issuance by Type of Issuer (Source: Zawya & RAM Ratings)
16.46 14.68
1.30
13.01 9.57
2.73
-
5.00
10.00
15.00
20.00
Malaysia GCC Others
USD billion
2012 2013 2014 As at end-April 2015
3-year Corporate Sukuk Issuance by Region(Source: Zawya & RAM Ratings)
-35%-21%
Slide 5
Size relative to GDP (%)
Public Sector Private Sector Total
USD billion USD billion USD billion
Japan 220.1 8,292.2 679.7 8,971.9
Korea 125.1 701.2 1,001.6 1,702.8
Malaysia 103.1 185.0 130.5 315.5
Singapore 81.9 146.5 94.6 241.1
Thailand 70.4 211.2 70.2 281.3
Hong Kong 67.1 109.5 84.7 194.2
China 50.6 3,334.7 1,857.8 5,192.5
Philippines 36.9 87.1 17.0 104.1
Vietnam 22.1 40.1 0.6 40.7
Indonesia 15.2 105.5 18.0 123.5
Comparison to Asian Debt Securities Market
60.5
42.7
0.0
50.0
100.0
150.0
200.0
250.0
Japan Korea Malaysia Singapore Thailand Hong Kong China Philippines Vietnam Indonesia
Private Sector Public Sector
(%)
Size of Asian Debt Securities Market Relative to GDP(Source: Asian Bonds Online as at Dec 2014 & RAM Ratings)
Size of Asian Debt Securities Market in USD billion (Source: Asian Bonds Online as at Dec 2014 & RAM Ratings)
Slide 6
“Relative to GDP, Malaysia’s
outstanding debt securities is
ranked the third largest in Asia
valuing at USD315.5 billion”
2Facilitative Strategies for Market
Development
- Malaysia’s Game Changer
Slide 7
Slide 8
Tax neutrality for Islamic finance transactions that require sale or lease of assets.
Liberal Foreign Exchange Rules in promoting Malaysia as an investment
destination.
Facilitative Strategies for Market Development
Tax Neutrality
And Attractive Fiscal Incentives1
Broad Investor Base - Competitive Pricing2
3.7
3.9
4.1
4.3
4.5
4.7
01
-Jan
-10
01
-Apr-
10
01
-Jul-
10
01
-Oct-
10
01
-Jan
-11
01
-Apr-
11
01
-Jul-
11
01
-Oct-
11
01
-Jan
-12
01
-Apr-
12
01
-Jul-
12
01
-Oct-
12
01
-Jan
-13
01
-Apr-
13
01
-Jul-
13
01
-Oct-
13
01
-Jan
-14
01
-Apr-
14
01
-Jul-
14
01
-Oct-
14
01
-Jan
-15
01
-Apr-
15
Market Indicative Yield - 5YR Corp-AAA(Source: RAM Ratings as at Apr-2015)
5YR Corp-AAA (Conv) 5YR Corp-AAA (Islamic)
3.9
4.4
4.9
5.4
5.9
01
-Jan
-10
01
-Apr-
10
01
-Jul-
10
01
-Oct-
10
01
-Jan
-11
01
-Apr-
11
01
-Jul-
11
01
-Oct-
11
01
-Jan
-12
01
-Apr-
12
01
-Jul-
12
01
-Oct-
12
01
-Jan
-13
01
-Apr-
13
01
-Jul-
13
01
-Oct-
13
01
-Jan
-14
01
-Apr-
14
01
-Jul-
14
01
-Oct-
14
01
-Jan
-15
01
-Apr-
15
Market Indicative Yield - 10YR Corp-AAA(Source: RAM Ratings as at Apr-2015)
10YR Corp-AAA (Conv) 10YR Corp-AAA (Islamic)
Facilitative Strategies for Market Development (cont’)
Shariah Governance Framework - Product Innovation3 The Shariah Advisory Council of the Securities Commission (“SC”) together with the
Shariah Advisory Council of BNM, serve to ensure compliance with Shariah
principles, while supporting product innovation through pronouncements on the
Shariah-compatibility of the Sukuk structures.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 End-April 2015
Sukuk Issuance (Malaysia) (No. of Issue) - Breakdown by Structure
Mudharabah
Istisna'
Al-Istithmar
Bai' Al-Dayn
Bai Bithaman Ajil
Wakalah
Bai' Al-Inah
Hybrid
Ijarah
Musharakah
Murabahah
LCY Sukuk Structures by Shariah Principles (Jan 2000 – Apr 2015)(Source: SC, Zawya & RAM Ratings)
Slide 9
Slide 10
Liberal Foreign Exchange Rules for international players to tap the Malaysian bond
market.
Facilitative Strategies for Market Development (cont’)
Adoption of Legal and Regulatory Best Practices4
Facilitative Rules for Issuance Process5
The Capital Markets Services Act 2007 governs the parameters for permitted
capital market activities, while reinforcing protection framework and promoting
international best practices.
The legal and regulatory framework is constantly reviewed taking into account latest
market, products and Shariah issues to ensure continuous development in the
Sukuk market.
Supranational (ASEAN):
Credit Gurantee & Investment
Facility (CGIF)
United Arab Emirates:
1) National Bank of Abu Dhabi
2) Abu Dhabi Islamic Bank PJSC
Portfolio of Foreign Issuers Rated by RAM Ratings
“RAM Ratings’ outstanding rated portfolio include 24 foreign entities
across 13 countries”
Japan:
1) Bank of Tokyo-Mitsubishi
UFJ Ltd
2) Mizuho Corp Bank Ltd
Bahrain:
1) Gulf International Bank BSC
2) Bahrain Mumtalakat Holding Company BSC
South Korea:
1) Hyundai Capital
2) Industrial Bank of Korea
3) Korea Development Bank
Kazakhstan:
Development Bank of Kazakhstan
Joint-Stock Company
Indonesia:
1) First Resources Limited
2) Golden Agri-Resources Limited
3) Bumitama Agri Limited
Kuwait:
Gulf Investment
Corp GSC
France:
Societe Generale1
Kingdom of Saudi Arabia:
Al Bayan Holding Company
Singapore: DBS Bank
Hong Kong:
Noble Group Limited
Turkey:
1) Turkiye Finans Katilim Bankasi AS
2) Kuveyt Turk Katilim Bankasi AS
Note:
1) Pending issuance
Source: RAM Ratings
Sukuk
Conventional
Note: RAM Ratings carry a Corporate Credit Rating on Dar Al-Arkan
Real Estate Development Company based in Saudi Arabia
Financial Institution/
Enhancement Ratings Slide 11
Slide 12
3Outlook for the Global Sukuk Market
Outlook for the Global Sukuk Market
Slide 13
139.05
118.31 116.23
100
120
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
2012 2013 2014 2015e 2015e
RAM Ratings estimate
Year
Total Global Sukuk New Issuance Trends(Source: Zawya/ RAM Ratings)
Total Global Sukuk New Issuance (Actual) 2015 RAM Estimated Total Global Sukuk New Issuance
Slide 14
4Role of Credit Rating Agency
Value
Proposition
of CRA
Independent
credit opinion
Benchmark
for pricing
Paves the
way for new
sectors, new
instruments
or green field
projects
Yardstick for
credit risk
across
industries
Investor
portfolio
inclusion
criteria
Surveillance
for investors
Value of Credit Rating Agency (“CRA”)
Slide 15
RAM Ratings’ Rated Portfolio
“As at end-April 2015, RAM Ratings has evaluated in total approximately
RM996.0 billion of bond/sukuk issuances over 2,256 issues across 221
issuers”Consumer & Industrial
Ratings
Agribusiness, Real Estate & Construction Ratings
Infrastructure & Utilities Ratings
Financial Institutions Ratings
Structured Finance Ratings
Sovereign Ratings
Insurance Ratings
Golden Crop Returns Berhad (2005)
MYR442.0 million Sukuk Ijara
First and largest ABS Sukuk backed
by plantation assets
Golden Crop
Returns
PG Municipal Assets Berhad (2004)
MYR80.0 million Sukuk
Mudharabah
First partnership-based Sukuk
Petronas Dagangan Bhd (1994)
MYR300.0 million Sukuk Murabahah
World’s first rated Sukuk
Cagamas MBS 2007-1-i (2007)
MYR2.11 billion Sukuk Musyarakah
World’s first Islamic RMBS
Telekom Malaysia Berhad (2013)
MYR3.0 billion Sukuk Wakalah
World’s first export –import bank to
issue Sukuk
EXIM Sukuk Malaysia Berhad (2013)
USD1.0 billion Multi-currency
Sukuk
First export–import bank in the
world to issue Sukuk
AmIslamic Bank Berhad (2014)
MYR200.0 million Sukuk Murabahah
World’s first Basel III-compliant Tier-
2 Sukuk Murabahah
Ihsan Sukuk Berhad (2015)
MYR1.0 billion Sukuk
World’s first Socially Responsible
Investment Sukuk
Slide 16
Malaysian Building Society Bhd
(2013) MYR495 mil Tranche 1
Covered Sukuk
Asia’s first Structured Covered
Sukuk
Thank You
Slide 17
Most Outstanding
Rating Agency for
Sukuk 2013
Most Outstanding
Rating Agency for
Sukuk 2011
Best Islamic
Rating Agency
2012
Best Research in
Islamic Finance
2011
Best Islamic
Rating Agency
2011
Second Most
Impressive Rating
Agency for Sukuk
2013
Suite 20.01, Level 20,
The Gardens South Tower
Mid Valley City, Lingkaran Syed Putra
59200 Kuala Lumpur
Malaysia