THE DEVELOPMENT OF ISLAMIC DEBT CAPITAL · PDF fileTHE DEVELOPMENT OF ISLAMIC DEBT CAPITAL...

SEMINAR ON ISLAMIC FINANCE

&

THE DEVELOPMENT OF ISLAMIC DEBT CAPITAL MARKETS IN

MALAYSIA

STRICTLY PRIVATE & CONFIDENTIALSTRICTLY PRIVATE & CONFIDENTIAL

17 March 2010 / 1 Rabiulakhir 1431H

MALAYSIA

EN SUFFIAN ARIFFIN

SENIOR MANAGER, DEBT CAPITAL MARKETS

CORPORATE INVESTMENT BANKING

BANK ISLAM MALAYSIA BERHAD

1. Overview of Malaysian Islamic Debt Capital Markets.

2. Malaysian Islamic Securities Experience: Evolution & Development.

3. Malaysia as Hub for Islamic Securities Issuance.

4. Moving Forward.

ContentsContents

Page 2

4. Moving Forward.

OVERVIEW OF MALAYSIAN

ISLAMIC DEBT CAPITAL MARKETS

Page 3

ISLAMIC DEBT CAPITAL MARKETS

Overview of Malaysian Islamic Debt Capital MarketsOverview of Malaysian Islamic Debt Capital Markets

Malaysian Islamic Financial MarketMalaysian Islamic Financial Market

Islamic Financial Market

Islamic Banking &

TakafulIslamic Capital Markets

Islamic Banking:

� Islamic Interbank

Page 4

Equity DebtDerivatives� Islamic Interbank

Money Market

� Islamic Financing

� Islamic Deposits

� Islamic Investment

Takaful:

� Takaful products

� Takaful linked

investments

� Islamic Profit

Rate Swap

� Islamic Foreign

Exchange Swap

� Islamic Cross

Currency Swap

� Islamic Unit

Trust

� Islamic REITs

� Islamic

Stockbroking

� Islamic Indexes

� Shariah

Compliant

Securities

� Islamic

Securities

� Islamic Medium

Term Notes

� Islamic

Commercial

Papers

� Exchangeable

Sukuk


The Market ParticipantsThe Market Participants

INVESTORS

• Islamic/

ISSUERS

• BusinessesIslamic

Debt

REGULATORY AUTHORITIES

BNM/ SC/ Bursa Malaysia/ Labuan FSA

Islamic Securities

Page 5

INTERMEDIARIES

Financial Institutions/ Rating Agencies/ Reporting Accountants/ Legal

Counsels/ Trustees/ Shariah Advisers

• Islamic/

Conventional

• Domestic/

International

• Institutional

• Businesses

• Government/

Government

Agencies

Surplus Funds

Debt

Capital

Markets


Regulatory FrameworkRegulatory Framework

REGULATORS

SC

� Established under the Securities

Commission Act 1993.

� To supervise & monitor activities of

capital markets activities under the

CMSA.

� To protect the investors rights.

� To promote and develop securities &

futures markets.

� To spearhead development of the

Malaysian Islamic capital markets.

Labuan FSA

� Formed in 1996 as regulator in Labuan

IBFC.

� To market & promote Labuan as the

premier international businesses and

financial centre in Asia Pacific.

Page 6

REGULATORS

BNM

� Established in 1959 under the Central

Bank of Malaysia Act 1958 (Revised

1994).

� To regulate and monitor monetary,

financial & payment systems.

� To promote and develop Islamic

finance via MIFC, INCEIF & ISRA.

� To act as Depository & Paying Agency

for bonds issued in Malaysia.

Malaysian Islamic capital markets.

Bursa Malaysia

� An exchange holding company that

regulates and operates the trading

activities on Bursa Malaysia.

� To promote Islamic capital markets

products via Bursa Malaysia for on-

shore market & LFX for offshore market.


Governing LawsGoverning Laws

Key Acts/ Guidelines

� Islamic Banking Act 1983 (“IBA”).

� Capital Markets and Services Act 2007

(“CMSA”).

� Labuan Islamic Financial Services and

Securities Act 2010.

� Guidelines on the Offering of Islamic

Securities (“IS Guidelines”).

Supplemental Laws

� Applicable tax and stamp duty legislation.

� Land laws.

� Lease laws for Ijarah transaction.

Page 7

Securities (“IS Guidelines”).

� Guidelines on the Offering of Asset-

Backed Securities.

� Shariah compliances according to IBA &

IS Guidelines.

� Rules on The Scripless Securities under

RENTAS System.

� Rules on Fully Automated System for

Issuing/ Tendering (“FAST”).

MALAYSIAN ISLAMIC SECURITIES

EXPERIENCE: EVOLUTION & DEVELOPMENT

Page 8

EXPERIENCE: EVOLUTION & DEVELOPMENT

Malaysian Islamic Securities Experience: Evolution & Development Malaysian Islamic Securities Experience: Evolution & Development

Evolution of Islamic SecuritiesEvolution of Islamic Securities

Kumpulan

SKS Power Sdn

Bhd (Sukuk

Istisna’)

PLUS SPV Sdn

Bhd (Sukuk

Musharakah)

The Islamic Securities structures

have evolved from simple BBAs to

more complex structures as more

legislations are introduced & also an

increased in the understanding of

Islamic finance among the industry

players.

Page 9

Shell MDS

Sdn Bhd

(BaIDS)

K.L.

International

Airport

Berhad (BBA

Notes)

Kumpulan

Guthrie Berhad

(Ijarah

Syndicated/

Sukuk)

Istisna’)

1990 1996 2001 2003 2008


New Capitals for 2009New Capitals for 2009

12,104.0 million

109,233.0* million

Equity Debt

RM11,969.7

Capital Markets

* Total issue amount approved by the SC.

Page 10

RM11,969.7 million

RM43,624.0* million

Islamic Equity

Islamic DebtIslamic

Capital Markets

Source: Securities Commission




Growth of Malaysian Debt Capital MarketsGrowth of Malaysian Debt Capital Markets

MYR 0.03

MYR 0.04

MYR 0.05

MYR 0.06

Millions

20-Year Growth - Islamic Debt Securities vs Conventional Debt Securities

Islamic Debt Securities

Page 11

MYR -

MYR 0.01

MYR 0.02

MYR 0.03 Islamic Debt Securities

Conventional Debt Securities

Source: Bank Negara Malaysia


Approved Islamic Securities in 2009 (by Quarters)Approved Islamic Securities in 2009 (by Quarters)

Period Issue Size

(RM ‘Million)

Q1 10,855

Q2 3,600 15,000.00

20,000.00

25,000.00

RM 'Million

Approved Islamic Securities in 2009 (by Quarters)

Page 12


Q3 4,500

Q4 20,000

Total 38,955 -

5,000.00

10,000.00

15,000.00

Quarter 1 Quarter 2 Quarter 3 Quarter 4

RM 'Million


ShariahShariah Contracts Applied in Islamic SecuritiesContracts Applied in Islamic Securities

7%

Islamic Securities Approved by SC in 2008

Musharakah Ijarah

Istisna' Murabahah

Mudharabah Bai Bithaman Ajil

9%

Islamic Securities Approved by SC in 2009

Musharakah Ijarah

Page 13

40%

26%

7%

9%

11%

7%


91%

MALAYSIA AS A HUB FOR

ISLAMIC SECURITIES ISSUANCE

Page 14

ISLAMIC SECURITIES ISSUANCE

Malaysia as a Hub for Islamic Securities IssuanceMalaysia as a Hub for Islamic Securities Issuance

Malaysia’s Competitive AdvantagesMalaysia’s Competitive Advantages

Comprehensive Regulatory & Supervisory Frameworks

Wider Investors Base

Liberal Foreign Expertise & KEY

Page 15

Liberal Foreign Exchange Rules

Expertise & Talents

Tax IncentivesContinuous Products

Development

KEY

ADVANTAGES


Key Benefits of Islamic Securities: Issuers’ PerspectiveKey Benefits of Islamic Securities: Issuers’ Perspective

TAX INCENTIVESVALUE PROPOSITION REGULATORY PROCESS

� Stamp duty exemption on

SC’s approved Sukuk.

� Tax deductible of issuance

cost.

� Tax neutrality.

� Wide investors base.

� Attractive pricing due to

strong demand.

� Strong structuring

� Facilitative issuance

process.

� Automatic approval for

AAA-rated for RM Sukuk

issue domestically & A-

Page 16

� Tax neutrality.

� Tax exemption on SPV

incorporation.

� Strong structuring

expertise.

� Enhance Issuers’ profiles.

issue domestically & A-

rated Sukuk for foreign

currency Sukuk.

� Any amendment to terms

of approved Sukuk need

only to inform SC.

� Exchangeable Sukuk

exempted from rating.


Promotion of Islamic Securities via MIFCPromotion of Islamic Securities via MIFC

To create a vibrant, innovative and competitive international

Islamic financial services industry in Malaysia focusing on the

following niche activities:-

(1) origination, distribution & trading of Islamic capital markets

and treasury instruments;

(2) Islamic fund & wealth management services;

(3) International currency Islamic financial services; and

(4) Takaful & retakaful.

Issuer

Page 17

Incentives for

Islamic Securities

� Tax exemption on income received by SPV.

� Companies that establish SPV are allowed a tax deduction on the issuing costs incurred by

the SPV.

� Tax deduction on expenses incurred for Islamic Securities approved by the Securities

Commission until year of assessment 2015.

� Stamp duty exemption on instruments used to issue Sukuk in any currency.

� Tax exemption and withholding tax exemption on profits received by non-resident.

� Tax exemption on profits received by resident and non-resident investors in respect of

foreign currency Islamic securities approved by the Securities Commission and originating

from Malaysia.

� Stamp duty exemption on investing and trading of sukuk.

Issuer

Investors


The ResultsThe Results

Issuer Date of Issue Issue Size

(USD million)

Rating

Rafflesia Capital October 2006 750.0 N/A

Malayan Banking April 2007 300.0 A3 (Moody)

Cherating Capital July 2007 850.0 N/A

Paka Capital Ltd March 2008 550.0 N/A

Petronas Sukuk August 2009 1,500.0 A1 (Moody)

List of Foreign CurrencyList of Foreign Currency--

Denominated issuances in Denominated issuances in

MalaysiaMalaysia

Page 18

Issuer Date of Issue Issue Size *

(RM million)

Rating

Tadamun Services

Berhad

August 2008 1,000.0 AAA (S&P)

Woori Bank June 2008 1,000.0 N/A

Industrial Bank of Korea April 2008 3,000.0 N/A

State Bank of India March 2008 1,350.0 N/A

The Export-Import Bank

of Korea

March 2008 3,000.0 N/A

List of Islamic Securities List of Islamic Securities

Issued in Malaysia by Issued in Malaysia by

Multinational Development Multinational Development

Banks/Financial Banks/Financial

Institutions/Foreign Institutions/Foreign

Governments/Foreign MNCs Governments/Foreign MNCs


MOVING FORWARD

Page 19

Moving ForwardMoving Forward

Issues to be Addressed Issues to be Addressed

The following considerations need to be addressed for Islamic Debt Capital

Markets to continue being one of the major components of funding:

� Greater clarity in transaction structures, improved documentations,

increased standardizations and lower overall complexities.

� Consensus among Islamic scholars around the world.

� Better issuers and investors education about Islamic Securities and

Page 20

� Better issuers and investors education about Islamic Securities and

Shariah compliance.

� A liquid secondary market.

� The structures for the Sukuk need to be more competitive in order to

motivate future Sukuk issuances.

� Continuous support from the Government and regulators to further

promote and develop the Islamic debt capital markets.

Moving ForwardMoving Forward

Future Outlooks Future Outlooks

� Increased demand from the Middle Eastern and Asian Muslims to invest in

products that are in compliance with their religious beliefs.

� The recent global economic recovery is expected to stimulate

infrastructure projects which require huge amounts of financings and the

Islamic Securities can be the preferred financing instrument to raise these

funding requirements.

Page 21

� More efforts have been implemented towards having a global Shariah

compliance for local Islamic products.

� More interests are shown by other countries such as United Kingdom,

Hong Kong, France and other European countries in Islamic finance is

expected to further boost the industry’s growth.

Thank You & Wassalam

Page 22

The information contained in this presentation may be meaningful only with the oral presentation and are of the

personal view of the presenter and does not necessarily represent an official opinion of Bank Islam Malaysia Berhad.

For further information, please contact:

Suffian Ariffin

Senior Manager, Debt Capital Markets

Corporate Investment Banking

Bank Islam Malaysia Berhad

Email: [email protected]

Date post:	06-Feb-2018
Category:	Documents
Upload:	buiquynh
View:	226 times
Download:	2 times

THE DEVELOPMENT OF ISLAMIC DEBT CAPITAL · PDF fileTHE DEVELOPMENT OF ISLAMIC DEBT CAPITAL...

Documents