Finance

Bahrain: High marks

Widely considered to be the best regulated Islamic finance market in the world, even Bahrain's Sharia-compliant banks have not been able to fully avoid the knock-on effects of the global economic downturn. Bahrain has long been a leader in the provision of Islamic finance services, being the first country to fully approve the carrying out of compliant banking activities and incorporate the sector within the wider banking industry. One significant advantage that Bahrain enjoys, apart from its greater experience in the market, is that it has a solid regulatory framework in place to ensure proper oversight of its burgeoning Islamic finance industry. As the agency charged with regulating all segments of the Kingdom's financial sector, the Central Bank of Bahrain (CBB) has put in place regulations specific to Islamic banking. These have been refined since their introduction in 2001, and in 2005 the bank issued the first-ever comprehensive regulatory framework specific to takaful and retakaful companies.

Abu Dhabi: Positive signs

Like the majority of stock markets around the world, the Abu Dhabi Securities Exchange (ADX) has endured an element of uncertainty since the onset of the global financial crisis. However, with the index on an 11-week high, and positive trading signals for the first half of the year, the capital's bourse can look to the future with a degree of optimism. The emirate's index, buoyed by a surging Emirates Telecommunications Corp (Etisalat), climbed 0.5 per cent to 2897 points on August 31, its highest finish since June 15. Other reasons for sanguinity came from the fact that the ADX index, market capitalization and volumes all increased in the first half of 2009, influenced by an appreciation for the positive long-term economic outlook for Abu Dhabi, according to Tom Healy, the chief executive of the ADX.

Gulf conventional bonds issuances leap ahead of Sukuk issuance for first time

According to Trowers and Hamlins, Gulf corporates have issued US$12.8 billion in conventional bonds over the past 12 months (to June 31), compared to just US$4.3 billion in Sukuk. Trowers & Hamlins explained that there was a jump of 15 per cent in the value of conventional corporate bond issuance in the Gulf from last year's US$11.2 billion, while Sukuk issuance fell 74 per cent from last year's US$16.9 billion. Trowers & Hamlins said that as the turmoil in the capital markets finally swept into the Gulf the price of corporate Sukuk fell much further than the region's corporate bonds. At one point the yield on corporate Sukuk increased to 17 per cent, while the yield on the comparable index of Gulf corporate bonds at that point only increased to 11 per cent.

Kuwait approves new US$349m Islamic bank

Kuwait is planning to set up a new Islamic bank with a capital of KD100 million (US$349 million). The new lender, called Warba Bank, will be 24 per cent owned by the Kuwait Investment Authority, while the rest will be held by the public, the Kuwaiti Minister of Cabinet Affairs, Rodhan Al-Rodhan said.

New Bahrain bourse eyes issuers from Syria, Jordan

The Bahrain Financial Exchange (BFX), set to begin operations next year, plans to attract Middle Eastern equity issuers from markets outside the Gulf Arab region, in particular from Jordan and Syria, an executive said. "We're looking at markets in the region that are not targeted by other major players," Arshad Khan, director at Indian exchange operator Financial Technologies Ltd, which owns BFX. "In Syria and Jordan there is a large base of potential issuers," he said. The Gulf market for initial public offerings (IPO) has been largely closed since the global financial crisis hit the region late last year, but bankers expect a few companies to test the waters in the coming months. BFX will compete with the Bahrain Stock Exchange and other bourses in the region such as Nasdaq Dubai. It will offer trading in both Islamic and conventional products in equities, derivatives, commodities and currencies.

Kuwait to set up new Islamic bank with free shares

The Kuwaiti cabinet has decided to establish a new Islamic bank with three quarters of its shares offered free to citizens. The Warba Bank, the fourth Islamic bank in the oil-rich emirate, will have a capital of 100 million dinars (US$350 million) in which the state-run Kuwait Investment Authority, the sovereign wealth fund, will own 24 per cent. The remaining 76 per cent stake, worth US$265 million, will be distributed equally to the 1.1 million Kuwaitis with the government footing the bill. Kuwait already has three Islamic banks, including Kuwait Finance House, one of the world's largest Islamic banks. It has also given approval to a conventional bank to become Islamic.

BNP eyes US$300m Gulf private equity fund

French bank BNP Paribas may raise up to US$300 million for a private equity fund active in the Gulf Arab region to tap opportunities arising from the financial crisis. BNP is looking to raise US$150 million in the first phase by mid-October and possibly a further US$150 million later, its regional chief executive, Jean-Christophe Durand, said. Private equity in the Middle East is expected to pick up again by the year-end, as banks become more willing to lend. In addition, local governments are pouring billions of dollars in transport, infrastructure and healthcare projects, offering opportunities for private equity firms to start investing again. BNP will contribute 25 per cent to the fund, while the remainder will come from large regional investors, Durand said, adding that the fund "will be opportunistic and GCC focused," expecting an uptick in merger and acquisition activity across the world's largest oil exporting region.

Turkey: Insured growth

Having gone through a period of consolidation and foreign investment, with many of the industry's leading firms taking on overseas partners, and having apparently ridden out the worst of the global financial crisis, Turkey's insurance sector appears to be again gaining momentum. There are some 60 companies in Turkey that offer insurance, reinsurance or private pension plan services, with most of the firms affiliated with local or foreign banks and the majority now having at least some overseas-ownership component. Shares in traded companies in Turkey's insurance sector have ridden the wave of the global recession over the past year. The industry index on the Istanbul Stock Exchange (ISE) peaked at around 38,000 points in late April 2008 before tumbling to 16,845 by the end of October. The year 2009, meanwhile, has been one of recovery.