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Shariah Finance

Global Sukuk Markets - November in Review




Zawya
December 6, 2010

November Issues

Despite the long Eid break in the Muslim world, Sukuk worth USD 5.79 billion were issued in November, up 8% from the previous month and more than double from the Sukuk issued in November last year.

The most remarkable issue in November came from the United Arab Emirates (UAE), largest Islamic lender Abu Dhabi Islamic BankAbu Dhabi Islamic BankLoading... (ADIBADIBLoading...) which closed a USD750 million sukuk on November 4th, marking the largest corporate issue out of UAE this year. Listed on London Stock Exchange and paying 3.745% on semi annual basis, ADIBADIBLoading...'s second sukuk was oversubscribed 4.8 times.

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First Sharia Compliant Movie Fund Raises $40m

ANTAR: THE BLACK KNIGHT, a film financed by the first Shariah-compliant film fund and set to include “a string of Hollywood ‘A-list’ actors” is about UAE-based hero Antar, the son of an Arab prince and an African slave who fought for his freedom to become a legendary explorer warrior.



Arabian Business
December 6, 2010
By Claire Ferris-Lay

The world’s first Sharia-compliant movie fund, which is set to film and produce its own Hollywood-style story of a UAE hero, has reached more than $40m in just four weeks, the fund’s manager has told Arabian Business.

Funding for Antar: The Black Knight is expected to reach $85-90m by April, half of which will come from UAE investors, said Jason Marsh.

“We’ve got $40m so far. It’s probably going to be around $85-90m. The fund only went online about four weeks ago so in four weeks we made some fairly hefty in-roads,” he told Arabian Business.

“Around 50 percent [of investors are] from the Middle East and 50 percent from the Europe. We are now in phases two of the funding and I expect that most of the rest of the money will come from the UAE,” he added.

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Rethink Structure of Sukuk Says Key Article

Islamic bonds are complicated derivatives with significantly higher risk than Western Conventional debt, and this is confirmed by this study.

"The sukuk market remains insignificant in comparison to conventional bond market but it is regarded as a higher risk and less profitable option than conventional bonds according to our research.”



Gulf Daily News
December 3, 2010
By Arthur McDonald

Islamic bonds are not perceived as positively as conventional debt markets, according to research carried out by the Lebanese American University (LAU) into the sukuk markets in Malaysia.

That was the message from LAU assistant professor of finance Dr Rima Turk Ariss, who was speaking on the sidelines of the fourth Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) conference at the Crowne Plaza yesterday.

"Our research into sukuk and conventional bond issuance in Malaysia suggests there is a need for rethinking the structure and marketing in sukuk.

"At present our research shows that sukuk is not perceived as positive in the market.

"We analysed stock market reaction to ordinary bond issue and sukuk issues where dual financing opportunities exist in Malaysia.

"Stock market valuations fall after sukuk issues compared to bonds," she said.

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AAOIFI Standards 'Vital for Islamic Finance'

The AAOIFI provides no explanation of the true nature of Shariah Law and Shariah Finance as developed in Iran by Ayatollah Khoemini in 1978-83 when the Shah of Iran was deposed. Iran was the first country to formally install Shariah Finance, and it remains the market leader, with 35% of all assets managed "the Shariah Way" housed in Iranian banks. The AAOIFI does not disclose the full laws and principles of Shariah Law, and yet certificates of Shariah compliance signed by Shariah Imam " financie scholars" attest to full compliance with the laws and principles of Shariah.



Gulf Daily News
December 2, 2010
Manama, Bahrain

The standards set up by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) have become the core of the re-engineering process of Islamic finance.

They provide the basis for innovation within the framework of Islamic teachings, Housing Minister and AAOIFI chairman Shaikh Ibrahim bin Khalifa Al Khalifa told delegates at a conference yesterday.

"Ultimately this will hopefully enhance users' confidence in Islamic practices and encourage growth of demand," he said.

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Sukuk Snap Five-Month Gain on Europe Debt Contagion Risk

Prices of Sukuk are falling as investors stay away from low investment grade sukuk and buy Conventional investment grade western bonds. The claim by promoters of Shariah Finance that Islamic Sukuk are less risky than Western bonds is being recognized by investors as a false claim.



Bloomberg
November 30, 2010
Dubai, United Arab Emirates

Islamic bonds slumped in November, snapping a five-month rally, as concern Europe’s debt crisis will spread reduced demand for higher-yielding assets in emerging markets.

Average yields on sukuk climbed 19 basis points, or 0.19 percentage point, in November to 5.04 percent, the highest level in two months, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Yields had dropped 194 basis points from May 31 until the end of October. The extra yield investors demand to hold non-Islamic emerging-market debt instead of U.S. Treasuries rose 22 basis points in the month to 267, according to JPMorgan Chase & Co.’s EMBI+ Index.

“The sukuk market doesn’t work in isolation,” Scott Lim, chief executive officer at Kuala Lumpur-based MIDF Amanah Asset Management Bhd., who oversees the equivalent of $670 million of assets, said in an interview Nov. 26. “Europe is having too many structural problems and this is only the beginning. It is going to be challenging for the bond market.”

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