Media Briefing On Malaysia's Islamic Finance Marketplace - NikMohamedDin - 1aug2013

Malaysias Islamic finance marketplace.
Expertise. Innovation. Deal Flow.

MEDIA BRIEFING
MALAYSIAS ISLAMIC FINANCE MARKETPLACE

Nik Mohamed Din Nik Musa
Director, MIFC Promotions Unit

1
st
August 2013
ISLAMIC FINANCE LEADERSHIP
EXPERIENCE MATTERS
A81 l
PART I
OUR MARKETPLACE
2
A81 l
Malaysias Islamic finance
marketplace is open to the world.

Tan Sri Dr. Zeti Akhtar Aziz
Governor, Bank Negara Malaysia
Chairman, MIFC Executive Committee
3
Malaysia has developed a comprehensive and sophisticated Islamic
finance marketplace that has grown from strength to strength for over
30 years.
Malaysia is the Marketplace
Characteristics of Our
Marketplace
! Robust regulatory, supervisory, Shariah and
legal framework
! Efficient and transparent price discovery
platform
! Deep primary market and active secondary
trading of instruments
! Diverse players and talent base with global
capabilities and connectivity for business
deals anywhere in the world
! Product breadth and depth, attractive to
global investors and issuers
! Efficient settlement system that allows
settlement and clearing in RM, USD and RMB
Malaysias Islamic Finance
Marketplace
4
A81 l
EXPERTISE. INNOVATION. DEAL FLOW.
5
PART II
WHY MALAYSIA AS AN ISLAMIC
FINANCE MARKETPLACE
6

Legal & Regulatory
Islamic Financial
Services Act
Government
Funding Act
Capital Market
Services Act
Shariah Advisory
Council
Central Banking Act
Shariah Governance
Framework
Dispute Resolution
Judicial system:
dedicated high court
KL Regional Centre
for Arbitration
Financial Mediation
Bureau
Payment, clearing and
settlement, custodian
Principal Dealers
Listing on Bursa with
authorise exchange
status
Infrastructure
Banking
16 Islamic banks
11 Islamic windows
4 International Islamic
Banks
18 International
Currency Business Units
(ICBU)]
6 Labuan Islamic banks
Takaful
12 takaful operators
4 retakaful operators
9 International Currency
Business Units (ICBU)
5 Labuan retakaful
companies
Fund Management
19 Islamic fund
managers
35 fund management
companies with Islamic
mandates
Legal firm
Accounting
Financial
Intermediaries
Financial Advisors
Consultancy Service
Professional Service
Diversified Players
Governance
Financial Markets
Islamic Capital Market
Islamic Money Market
Foreign Exchange
Market
Commodity Market
Bursa Suq Al-Sila
Islamic
Banks & Takaful
Companies
Islamic
Capital
Market
Islamic
Money
Market
Money
market
Conventional
Banks & Insurance
Companies
Capital
market
Malaysian
Financial
System
Labuan
IBFC
MALAYSIAS COMPREHENSIVE ISLAMIC FINANCIAL ECO-
SYSTEM CREATES A MARKETPLACE FOR ISLAMIC FINANCE
7
PART III
DEVELOPMENT IN MIFC
8
MIFC INITIATIVE FOR GREATER INTERNATIONAL INTEGRATION
& INTER-LINKAGES ON ISLAMIC FINANCE
9
CONTINUED GROWTH OF ISLAMIC BANKING INDUSTRY
!"#$%&' )*+ +",-./0 !-1232%1/ )#//&2,4 +10 5678
Total Assets - Islamic vs Conventional Banking
Market share of Islamic
banking against total @
May 2013
Assets: RM525.63 b (24.24%
market share)
Financing: RM330.59 b
(26.2% market share)
Deposits: RM406.8 b (25.8%
market share)
Islamic Banking Foreign Currency Business
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2001 2002 2003 2004 2003 2006 2007 2008 2009 2010 2011 2012 May
2013
lslamlc Convenuonal
8M ' mllllon
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Dec
06
Mar
07
Jun
07
Sep
07
Dec
07
Mar
08
Jun
08
Sep
08
Dec
08
Mar
09
Jun
09
Sep
09
Dec
09
Mar
10
Jun
10
Sep
10
Dec
10
Mar
11
Jun
11
Sep
11
Dec
11
Mac
12
Jun
12
Sep
12
Dec
12
Mac
13
May
13
RM' million
FX Asset FX Deposits FX Financing
"#$% #&&'() *+,-.
"#$% /01213014) *5,6.
"#$% 7'89&0(&) *+.
10
I
s
l
a
m
i
c

W
i
n
d
o
w
s

F
u
l
l
-
F
l
e
d
g
e
d

I
s
l
a
m
i
c

B
a
n
k
s

Affin Islamic Bank
AmIslamic Bank
CIMB Islamic Bank
Hong Leong Islamic
Maybank Islamic
RHB Islamic Bank
Public Islamic Bank
Kuwait Finance House
Al Rajhi Bank & Invst Cp
Asian Finance Bank
HSBC Bank
OCBC Al-Amin
Stan. Chartered Saadiq
Mizuho Corporate Bank
ICBUs
ICBUs
AmInvestment Bank
Bank of Tokyo Mitsubishi UFJ (M)
RHB Investment Bank
DIVERSE PLAYERS OFFERING
ISLAMIC BANKING PRODUCTS & SERVICES
Investment
Banks
Dev.t Financial
Institutions
Commercial
Banks
Islamic
Banks
International
Islamic Banks
Development
Financial
Institutions
11
Malaysla represenLs 17 of global Lakaful
conLrlbuuon (2012: 8M6.3b)
1akaful operaLors can now lnvesL up Lo 100
of nAv lnLo forelgn markeLs/securlues
Source: 8ank negara Malaysla
ENCOURAGING GROWTH IN MALAYSIAS TAKAFUL INDUSTRY
Takaful Re-takaful
General &
Family
Family
Market Penetration Rate (%)
:1;<&(=> ?++5 ?+@+ ?+@@ ?+@? A@ ?+@B
1akaful 9.3 11.1 12.8 13.1 13.3
lnsurance 42.7 42.9 42.7 41.2 41.3
noLe:
1. MarkeL peneLrauon raLe = number of pollcles or cerucaLes ln force / LoLal populauon
2. 1oLal populauon ls based on 2012 gure
Market Share (%): Takaful / Total Market (Takaful + Insurance)
?++5 ?+@+ ?+@@ ?+@? A@ ?+@B
AsseLs (1akaful
fund +
Shareholders' fund
11.1 12.6 13.0 14.3 13.9
12
Expertise. Innovation. Deal Flow. 13
TOTAL: RM 1,598.81bn
(as at June 2013)
TOTAL: RM998.9bn
(as at June 2013)
TOTAL: RM550.87bn
(as at May 2013)
Equities

Sukuk/bonds

Fund management

Islamic AUM
RM82.48 bn
(USD27.5 bn)
Conventional
AUM
RM468.39bn
(USD156.1 bn)
Sukuk market
RM492.1bn
(USD164 bn)
Bond market
RM506.8bn
(USD168.9
bn)
Non-Shariah
equities
RM591.09bn
(USD197.03
bn)
Shariah
equities
RM1007.72bn
(US335.9 bn)
Malaysias Islamic Capital Market as at Dec 2012
Source: Securities Commission
ISLAMIC CAPITAL MARKET PLAYS SIGNIFICANT ROLE
IN MALAYSIAS CAPITAL MARKET
Private
RM275bn
(55%)
13
Islamic PDS
RM275.1bn
(66%)
Conventional PDS
RM140.9bn
(33%)
66% of Private Debt
Securities (PDS)
issuances are Islamic PDS
13
Global sukuk issuance 1H2013
Global sukuk outstanding 1H2013 (USD245.3b)
Source: KFH Research
Malaysia held USD148.2 billion or 60.4% of global
market share as at 1H13
Source: Bloomberg, KFH Research
Source: Bloomberg, KFH R
14
Malaysia issued USD41.5 billion or 68% of the total
sukuk issued, out of USD61.2 billion issued in 1H13
MALAYSIA AS A KEY MARKETPLACE FOR GLOBAL SUKUK
2000 2001 2002 2003 2004 2003 2006 2007 2008 2009 2010 2011 2012 1P13
Clobal CuLsLandlng 1,273.4 1,436.4 3,882.7 9,628.1 16,213. 27,383. 31,383. 94,720. 104,803 123,162 142,311 177,843 229,309 243,286
Malaysla CuLsLandlng 1,243.4 1,323.4 3,334.3 7,634.8 11,979. 20,187. 33,333. 37,323. 61,970. 73,236. 89,367. 106,971 143,913 148,172
Malaysla MarkeL Share 97.6 90.9 91.3 79.3 73.9 73.2 64.7 60.3 39.1 61.1 62.9 60.1 62.8 60.4
0
10
20
30
40
30
60
70
80
90
100
0
30,000
100,000
130,000
200,000
230,000
300,000
C
D
7

E
0
F
F
0
9
1

2002 2003 2004 2003 2006 2007 2008 2009 2010 2011 2012 1P13
Clobal lssuance 2.30 3.73 6.64 11.30 23.32 46.02 20.63 28.02 43.13 83.07 131.18 61.18
Malaysla lssuance 2.28 4.10 4.37 8.21 13.30 23.68 6.47 20.41 32.83 60.92 97.08 41.43
Malaysla MarkeL Share 91.0 71.4 63.9 71.4 32.9 33.8 31.4 72.8 72.7 71.6 74.0 67.8
0
10
20
30
40
30
60
70
80
90
100
-
20
40
60
80
100
120
140
C
D
7

G
0
F
F
0
9
1

H2F2>&02
I6.
Saudl
Arabla
12
uAL
8
lndonesla
3
1urkey
3
8ahraln
2
CaLar
1
aklsLan
1
14
MALAYSIA ADVANCES AS A
MULTICURRENCY SUKUK ISSUANCE MARKETPLACE
Preference by foreign issuer to issue sukuk in Malaysia
Source: Bloomberg, KFHR June 2013
1,000
1,330
3,113
900
0
1,000
2,000
3,000
4,000
3,000
6,000
2010 2011 2012 !an - !une 2013
MYR mil
Vibrancy of multicurrency sukuk programs
Source: Bloomberg
1.13
0.33
3.00
2.60
4.00
1.16
1.8
1.17
0.08
0.16
0.00
1.00
2.00
3.00
4.00
2007 2008 2009 2010 2011 2012 !an-!un
2013
uSu
SCu
Cn?
uSu bll
J9E<=2 CD7@++E K?+@+L
ME2& &<N<N O /"P &<N<N 0&&<'; 01 H2F2>&02
Q'(=912& CD7@,*G K?++5L

$9R'=1E'1( 9S H2F2>&02 K$THL
CD7@,?*G K?+@+L
$TH CD7?G K?+@@L
UV2W212V D$7@,*G K?+@+L
:&F2E03 7'R'F98E'1( X21N K:7XL
CD7*++E K?+@+L
UV2W212V %HX*++E K?+@@L
UV2W212V CD7B*Y,6E 'Z3V214'2GF'
K?+@?L
:7X CD76++E K?+@?L
#Z02(2 %HX@,+G K?+@?L
D0E' 72=G> CD76++E K?+@BL
:7X CD7@G K?+@BL
16
PLATFORM FOR MYR SUKUK BY FOREIGN & LOCAL ISSUERS
Foreign Issuers GLCs & MNCs
Shell MDS Sdn. Bhd, MYR125mil
(1990)

IFC, World Bank, MYR500 mil (2004),
MYR760 mil (2005)
AEON Credit Services, MYR400 mil
(2007)

Tesco Stores, MYR3.5 bil program
(2007)

Binariang GSM (Maxis Comm.)
MYR15.35 bil (2007)

Toyota Capital Services, MYR1 bil
program (2008)
Islamic Development Bank, RM1 bil
MTN (2008)

Sime Darby, MYR4.5 bil program
(2009)
Development Bank of Kazakhstan
RM240 mil (2012)
Abu Dhabi National Energy Company
(TAQA) RM650 mil (2012)
Gulf Investment Corporation, RM1.675
bil (2011, 2012)

National Bank of Abu Dhabi MRY1.5 bil
(2010, 2012)

Noble Group MYR900 mil (2012, 2013)

Bahrain Mumtalakat Holding Company
MYR450 mil (2012, 2013)

PLUS, MYR30.6b program (2012)
Celcom Axiata, MYR4.2b (2010)
Danainfra, MYR1.5 bil (2013)
16
MALAYSIAS DEEP LIQUIDITY IN SUKUK MARKET CREATES
ATTRACTIVE PRICING
Wider investor base for sukuk vs bond, creating higher demand, thus better
pricing for issuers

Transparent and well established price discovery mechanism, creating a deep
and vibrant secondary market trading

Malaysias Sukuk Market has world-class infrastructure for data and valuation
which meets global standards for Financial Reporting and Risk Management
3-yr bond yield matrix
MGS
A@
@B
A-
@?
AB
@?
A?
@?
A?
@B
B,+@ B,+? B,@I B,+I B,?Y
B,Y+ B,YB B,Y? B,I5 B,YI AAA
B,6* B,66 B,66 B,66 B,6I AA
*,6@ *,66 *,5I I,+5 *,-@ A
B,B@ B,?Y B,@5 B,@@ B,BI IRS
3-yr sukuk yield matrix
GII
A@
@B
A-
@?
AB
@?
A?
@?
A?
@B
B,?+ B,?B B,?B B,@6 B,BY
B,II B,I5 B,I6 B,I* B,Y? AAA
B,6@ B,6- B,6- B,6- B,6? AA
*,YY *,6- *,5? I,+* *,BY A
B,B@ B,?Y B,@5 B,@@ B,BI IRS
Comparison between similar Sukuk and Conventional Bonds shows savings for issuers:
17
Rank Stock Exchanges Number Value (USD) Value (USD bil)
1 Bursa Malaysia 19 33,506,503,404 33.51
2 London Stock Exchange 37 25,816,837,985 25.82
3 Dubai Financial Market 12 10,080,735,194 10.08
4 Nasdaq Dubai 11 7,920,864,534 7.92
5 Saudi Stock Exchange (Tadawul) 7 7,470,640,000 7.47
6 Irish Stock Exchange 18 6,660,080,000 6.66
7 Labuan International Financial Exchange 8 6,378,562,066 6.38
8 Indonesia Stock Exchange 52 5,746,042,803 5.75
9 Singapore Exchange 9 4,865,701,569 4.87
10 Hong Kong Exchanges & Clearing Limited 4 3,607,800,000 3.61
11 Luxembourg Stock Exchange 2 1,770,000,000 1.77
12 Bahrain Stock Exchange 4 1,163,829,787 1.16
MALAYSIAS BURSA RANKS TOP EXCHANGE IN SUKUK LISTING
RANTAU ABANG CAPITAL
BERHAD

RM 3 BILLION ICP/IMTN
PROGRAMME

RM 7 BILLION IMTN PROGRAMME
2009

PETRONAS GLOBAL SUKUK LTD

USD 1.5 BILLION
5 YEAR SUKUK IJARAH

FIRST GLOBAL USD SUKUK
LISTED ON BURSA MALAYSIA
2009
CAGAMAS MBS BERHAD

RM 4.16 BILLION MUSHARAKAH
RESIDENTIAL MORTGAGE-
BACKED SECURITIES

FIRST RINGGIT MALAYSIA SUKUK
2009
GE CAPITAL SUKUK LTD.

USD 500 MILLION
5-YEAR SUKUK IJARAH

FIRST FOREIGN SUKUK LISTED
ON BURSA MALAYSIA
2009
CIMB ISLAMIC BANK BERHAD

RM 2 BILLION 22-YEAR TIER-2
JUNIOR SUKUK MUSHARAKAH
PROGRAMME

FIRST ISLAMIC FINANCIAL
INSTITUTION TO LIST SUKUK ON
BURSA MALAYSIA
2009
KHAZANAH NASIONAL BERHAD

RM 20 BILLION GOVERNMENT
GUARANTEED SUKUK ISSUANCE
FACILITY
2009
1MALAYSIA SUKUK GLOBAL
BERHAD

USD 1.25 BILLION
5-YEAR SUKUK IJARAH

FIRST SOVEREIGN SUKUK
2010
SIME DARBY BERHAD

RM 4.5 BILLION
20 YEARS SUKUK MUSHARAKAH

FIRST LISTED ENTITY TO LIST
THEIR SUKUK ON BURSA
MALAYSIA
2010
NOMURA SUKUK LIMITED

USD 100 MILLION
SUKUK IJARAH

FIRST SUKUK LISTING BY ASIAN AND
JAPANESE INTERNATIONAL ENTITY
2010
ISLAMIC DEVELOPMENT BANK

RM 1 BILLION
10-YEAR SUKUK IJARAH
ISSUED THROUGH
TADAMUN SERVICES BERHAD
FIRST MULTILATERAL DEVELOPMENT
BANK TO LIST RINGGIT SUKUK
2010
AMISLAMIC BANK BERHAD

RM 3 BILLION
30-YEAR SENIOR SUKUK
MUSHARAKAH PROGRAMME

2010
Source: 8ursa Malaysla, 31 May 2013
MALAYSIA HAS EXPERTISE IN STRUCTURING ISLAMIC FUNDS
6 of the top 20 global Islamic funds
management companies are from
Malaysia.
Malaysla, 31
(uSu20.2bn)
Saudl Arabla,
21
(uSu13.7bn)
lreland, 7
(uSu4.6bn)
aklsLan, 6
(uSu3.9bn0
lndonesla, 6
(uSu3.9bn)
kuwalL, 6
(uSu3.9bn)
Luxembourg,
3 (uSu3.3bn)
CLhers, 18
(uSu11.7bn)
Source: 8loomberg, lllS, klP8, uec 2012
Islamic funds growth continues its
upward trends to reach USD65.1b in
2012 with average annual growth of
11.2%
The steady economic performance and
rising wealth of HNWIs in Asia and the
GCC has helped to increase the
acceptance of Islamic funds, given that
more than 70% of Islamic funds are
centered in these two regions
:&F2E03 /<1;& J'( #&&'( [2F<'
19
List of Malaysias IFMCs @ June 2013
JV IFMC Local Foreign
1 Asian Islamic Investment Management S/B 49% 51%
2 CIMB-Principal Islamic Asset Management S/B 60% 40%
3 OSK-UOB Islamic Fund Management Berhad 70% 30%
Wholly-owned Local IFMC
4 AmIslamic Fund Management S/B
5 BIMB Investment Management Berhad
6 i-VCAP Management S/B
7 Muamalat Invest S/B
8 RHB Islamic Asset management S/B
9 Kenanga Islamic Investors Berhad
Foreign IFMC
10 Aberdeen Islamic Fund Management S/B
11 Amundi Islamic Malaysia S/B
12 BNP Paribas Islamic Asset Management Malaysia S/B
13 Eastspring Al-Wara' Investments Berhad
14 Franklin Templeton GSC Asset Management S/B
15 KFH Asset Management S/B
16 Nomura Islamic Asset Management S/B
17 Reliance Asset Management S/B
18 Saturna Sdn Bhd
19 Guidance Investments S/B Total AUM of IFMCs as at 31 Dec 2012:
RM27.9 billion
DIVERSITY OF PLAYERS WITH GLOBAL CAPACITIES & CAPABILITIES
20
Islamic wholesale
funds
Islamic unit trust
funds
Shariah-compliant
equities
Source: Securities Commission, as at end June 2013
FTSE Bursa Malaysia Shariah
Indices are based on
internationally compliant
criteria
MALAYSIA OFFERS WIDE RANGE OF SHARIAH COMPLIANT
INVESTMENT INSTRUMENTS
21
Islamic
REITs
Islamic
ETFs
Source: Securities Commission, as at end June 2013
MALAYSIA OFFERS WIDE RANGE OF SHARIAH COMPLIANT
INVESTMENT INSTRUMENTS
22
Bursa Suq Al Sila Average Daily Volume
(ADV)
BURSA SUQ AL-SILA COMMODITY TRADING PLATFORM
IS GROWING TRACTION
Bursa Suq A-Sila (BSAS) is the 1
st
Shariah-compliant
international commodity trading platform in the world
Objective: to accommodate Islamic financing, deposits and
sukuk issuances and to facilitate liquidity management for
Islamic financial institutions
For 1H2013, the ADV of BSAS increased by 57% to RM3.4 billion
As at June 2013, BSAS
has 74 registered
members from 10
countries:
Malaysia
Singapore
Hong Kong
Brunei Darussalam
Saudi Arabia
Bahrain
Kuwait
United Kingdom
United Arab Emirates
Chartered Islamic Finance Professional
(CIFP)
- Equivalent to Masters Degree
- Fully accredited by the Malaysian
Qualifications Agency (MQA)
- Have attracted students from over 70
countries
Masters in Islamic Finance (MIF)
- For academics and practitioners to
provide comprehensive
understanding of operational issues
in Islamic finance industry
PhD programme
- By Coursework and Dissertation
- Industry driven, for candidates with
extensive experience
PROGRESSIVE EFFORTS IN HUMAN CAPITAL DEVELOPMENT
B?
Y-
@*5
@IB
Y
@-
@6
B
B
+ *+ @++ @*+ ?++
?++5
?+@+
?+@@
?+@?
QV7 H2&('=& ":/Q
Number of INCEIF Graduates (2009-
2012)
Source : www.lncelf.org/
Global university offering certification & post
graduate studies in Islamic finance (established 2006)
Strategic collaborative partnership:
Courses offered:
J9, 9S &(<;'1(& '1=9FF'; \ ]<F> ?+@B 0& ?^??- S=9E 6B 39<1(=0'&
24
MEDIA CONTACT

nikdin@bnm.gov.my
ISLAMIC FINANCE LEADERSHIP
EXPERIENCE MATTERS
MALAYSIAS ISLAMIC FINANCE MARKETPLACE

Media Briefing On Malaysia's Islamic Finance Marketplace - NikMohamedDin - 1aug2013

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Malaysias Islamic finance marketplace.

Expertise. Innovation. Deal Flow.

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