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Shariah Finance

DIFC Shariah Debt Two-Month Rally 'Gone Too Far' in Dubai

Owner of assets in the Dubai International Financial Centre, DIFC Investments is in debt, and Islamic bonds aren’t helping matters.

August 12, 2010
Dubai, United Arab Emirates

The two-month rally in DIFC Investments LLC’s Islamic bonds is ending on concern the Dubai state-controlled developer will struggle to meet payments on more than $3 billion of debt.

The notes that comply with Shariah law dropped for a third day yesterday to 79.15 cents on the dollar after surging almost 10 percent since the end of May, according to data compiled by Bloomberg. The securities need to fall at least 4 percent to 76 cents or below before they are attractive to buy, according to Zafar Nazim, a JPMorgan Chase & Co. analyst in London.

DIFC Investments, the owner of assets in the Dubai International Financial Centre, a tax-free zone, had its credit rating cut one level by Moody’s Investors Service on July 8 and its outlook reduced to negative this week by Standard & Poor’s, which cited about $3.1 billion of debt and “uncertainties” over the company’s plans to sell $1 billion of assets.


HSBC Hiring Heavily

HSBC has sounded the alert for new employees across all business lines. It's looking to add 1,000 workers to support its Islamic banking unit and wants to add 500 private bankers in Asia, Latin America, and the Middle East.

August 2, 2010

Having reported positive earnings results for the first half of the year, HSBC has also announced that it's bulking up its headcount across many of its business lines.

The bank is planning to add 1,000 staff members in its Personal Financial Services unit to support its growing Islamic banking unit, Amanah, and aiming to add 500 private bankers in the emerging markets of Asia, Latin America and the Middle East. It is also recruiting for 500 staff in Brazil and Mexico.

The heavy hiring is spurred on, in part, by the positive results the bank reported for the first half of 2010. According to The Wall Street Journal, its net profit doubled, from $3.35 billion a year ago to $6.76 billion for the period. In general, the bank remains optimistic on the outlook across all its business lines, including in investment banking where it registered a fall in profit.


Bad Debts in Middle East Hit HSBC

Despite a 40% drop in their Middle East markets, HSBC continues to expand its Islamic Banking businesses under the name of its wholly owned subsidiary, Amanah. Read this article.

The National
August 2, 2010
Dubai, United Arab Emirates

HSBC Middle East's profits dropped by almost 40 per cent in the first half of the year after the banking giant was forced to write-down US$438 million (Dh1.6 billion) of risky loans. Impairment charges for bad and doubtful debt rose by 12 per cent from $391m in the first half of last year, with analysts attributing the increase to the lender booking provisions to cover its exposure to Dubai World's debt restructuring.

Pre-tax profits declined to $393m from $643m in the same period last year, as the regional division of the bank lagged the performance of the group's other divisions. Globally, the bank more than doubled its first-half pre-tax profits to $11.1bn as bad-debt provisions fell and as its North American unit returned to profit for the first time in three years, the bank said yesterday. Nevertheless, HSBC remained positive in its banking outlook for the UAE and the region.

"The medium and long-term outlook for the UAE and the rest of the region remains positive with strong growth potential," said Michael Geoghegan, the group chief executive. HSBC has one of the largest exposures to Dubai World's $23.5bn debt restructuring. The bank is a member of the seven-member co-ordinating committee leading creditor talks with the conglomerate. "As one of the long-term bankers to Dubai World and the various entities related to the Government of Dubai, HSBC will continue to work constructively to address the prevailing issues," said Mr Geoghegan.


GCC Bond Value Dips 32% in H1

The value of bonds and sukuk issued by Gulf oil producers plunged by nearly 32% in the first half of this year (from around $35 billion to nearly $24.2 billion), but conventional bonds continued to dominate the market, according to Markaz financial centre.

August 1, 2010
Kuwait City, Kuwait

The value of bonds and sukuk issued by Gulf oil producers plunged by nearly 32 per cent in the first half of this year but conventional bonds continued to dominate the market, according to a Kuwait financial company.

From around $35 billion in the first half of 2009, the total value of bonds and sukuk (Islamic financial instruments) slumped to nearly $24.2 billion in the first half of 2010, Markaz financial centre said in a study.

April was the dominant month in terms of issuance frequency and value, with 17 issuances and $6.1 billion, raising 25.1 per cent of H1 2010 total value.

"Continuing with the trend witnessed since 2003, conventional issuances raised the largest amount during the first half of 2010 with $20.1 billion through 68 issues representing 82.9 per cent of the total value raised, and five times the total value of sukuk issued during the same period," the report said.


Kuwait's IIG Defaults on $152.5m Sukuk

Kuwait's International Investment Group (IIG) encountered its second sukuk default this year. The investment firm said in April it had appointed an international consultant, which it did not name, to review its business after it defaulted on a $3.35 million payment for a $200 million Islamic bond.
July 26, 2010
Kuwait City, Kuwait

IIG said on Monday its payment on the Islamic bond, or sukuk, had been scheduled for July 12.

The company said KPMG would carry out an independent review of its business and make an assessment of its financial position. IIG said it has also received the central bank's approval for its 2009 financial statements.

"IIG will then be able to assess its positions and restructuring options with assistance from its professional advisors," the company said.

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