Finance

Qatar's Masraf Al-Rayan launched US$1.1bn GCC fund

Qatari Islamic lender Masraf al-Rayan said it had launched a new GCC-wide fund with a mandate to manage up to US$1.1 billion and focus on Gulf equities, as well as fixed income instruments. "We believe the time is ripe to launch a fund to tap into the region's enormous potential, especially as valuations remain very attractive," said Hussain Ali Al Abdulla, chairman and managing director of Masraf al-Rayan, in a statement on the Qatar bourse website. The fund, "Al Rayan GCC Fund" will comply with Islamic principles, and will be managed by Al Rayan Investment. Several banks in the Gulf region are considering launching Islamic bond, or sukuk, funds.

Islamic megabank to launch in 6-12 months

The creation of a planned Islamic investment megabank is in "fairly advanced stages" and will likely be launched in the next six to 12 months, an executive at a firm advising on the project said. A plan to form the world's largest sharia-compliant lender - which is being promoted by the chairman of Al Baraka Banking Group, Sheikh Saleh Abdulla Kamel - has been in the works for some years. Sheikh Saleh said last April the global financial crisis had delayed the project, but that they hoped to launch it by the fourth quarter of 2009. "The key shareholders I would say are on board and we are looking for an imminent launch, within six months to a year," Sameer Abdi, head of Islamic finance at Ernst & Young, told delegates at the Reuters Islamic Banking and Finance Summit in Bahrain. Sheikh Saleh said in April the new institution so far had about 10 shareholders, including the Islamic Development Bank, Saudi Investment bank and the Kuwait Real Estate Bank. Bigger Islamic banks are seen as crucial for the industry to realize its growth potential and to compete with Islamic windows or subsidiaries of Western conventional banks that have large market shares in wholesale banking services. Abdi said the bank's "capital aspirations" were between US$3 billion and US$4 billion. "It's progressing very, very quickly, even in such tough market conditions," Abdi said. Conventional banks, regional as well as international, would likely play a role in the project, but their exact role had yet to be decided.

RAK: Sound all along

The global financial crisis has prompted calls to return to basics and emphasize sound fundamentals. While most of the formerly fashionable financial innovations – such as credit-default swaps, mortgage-backed bonds and single-tranche collateralized debt obligations – took a beating, one segment exhibited remarkable resilience: Islamic banking. Islamic banks, as well as traditional banks that offer Islamic services, have been a part of RAK’s financial scene from the outset. Major regional players such as Abu Dhabi Islamic Bank, Dubai Bank, Dubai Islamic Bank (DIB) and Noor Islamic Bank have active branches in RAK, and the homegrown National Bank of RAK received a license from the UAE Central Bank to offer sharia-compliant services in 2007. DIB has been especially active, opening a fourth branch in RAK in late 2009 and becoming the official escrow agent for real estate deals via an agreement with RAK Investment Authority. While the financial sector as a whole recorded historic drops in activity and profit over the last two years, a WTO report on trade levels predicted aggregate asset growth of Islamic banks to reach an impressive 15-20 per cent in 2009 – down from the optimistic 20-30 per cent predicted in 2008, but far from disappointing. Yet despite their strong showing, some analysts warn that Islamic banking, like so many of the financial vehicles that enjoyed soaring popularity over the past decade, is attracting investors with false impressions of lower risk. Yet despite these risks, public and private investors are still creating high demand for Islamic financial services. RAK’s government unveiled a US$2 billion sukuk program in 2008, with a preliminary issue of Dh1 billion (US$272m) in May 2008 and a heavily subscribed Dh1.47 billion (US$400m) issue in the summer of 2009. The strong investor response indicates the RAK government’s credibility among international investors is solid. And while historically sukuk issues have attracted the most attention within the GCC region, over half the stakeholders in the 2009 issue are from outside the region: 34 per cent of investors are in Asia and 19 per cent in Europe. While many of the most well established Islamic banks are based in the UAE, continued demand shows that there is still space for new players in the market. Greater competition should stimulate efficiency and growth in 2010 and beyond, marking the rise of Islamic banking as no fleeting fashion. For the sake of investors, it is to be hoped that Islamic banking regulation rises along with it. (Source: OBG)

Qatar Exchange to start bond trading by September

The Qatar Exchange is set to implement the NYSE Euronext’s Universal Trading Platform (UTP) and start trading in bonds before September this year, Qatar Exchange Chief Executive Officer Andre Went said. “We have made good progress. We are well on track to implement the UTP in September and also start trading in bonds,” Went said on the sidelines of a conference organized by Beltone Financial in partnership with the Qatar Exchange. On trading in derivatives, Went said, “It is planned. But I can’t tell you when we will start.” Until now, only cash equity trading is allowed at the Qatari bourse. Last year in June, the NYSE Euronext acquired a 20 per cent stake in the Qatari bourse for US$200 million. Government owned Qatar Holding controls the remaining 80 per cent stake.

Arab bourses gain more than US$36bn in six weeks

Arab equity investors increased their wealth by more than US$36 billion (Dh132bn) in the first six weeks of 2010 and the bulk of the gains were in the UAE and other Gulf oil producers, official data showed in late February. From around US$890 billion at the end of 2009, the combined market capitalization of Arab bourses swelled to nearly US$926.6 billion on February 19, an increase of US$36.6 billion, showed the figures by the Abu Dhabi-based Arab Monetary Fund (AMF), which tracks regional markets. The gains were mainly in the bourses of the UAE, Kuwait, Saudi Arabia and Qatar as there was a decline in most other Arab stock exchanges. Saudi Arabia's Tadawul, by far the largest and busiest stock market in the Middle East, gained around US$7 billion. Kuwait surged by nearly US$13 billion while Qatar gained about US$4 billion. Abu Dhabi's bourse also grew by nearly US$4 billion while Dubai rose by about US$1 billion. There were slight increases in the smaller GCC exchanges of Oman and Bahrain, said the AMF. Outside the Gulf, Egypt fell by about US$1 billion while there were small declines in Jordan and Lebanon and a slight rise in Morocco. Analysts expect 2010 to be a better year for the region's markets due to global recovery, higher oil prices and an expected better performance by listed firms. They also cited what they described as improving confidence.

DFSA strengthens ties with the QFC Regulatory Authority

The Dubai Financial Services Authority (DFSA) entered into a Memorandum of Understanding (MoU) with the Qatar Financial Centre (QFC) Regulatory Authority. The MoU was signed on behalf of the DFSA by Chief Executive, Mr. Paul Koster, and Mr. Phillip Thorpe, Chairman and Chief Executive Officer of the QFC Regulatory Authority, during the 4th GCC Regulators' Summit, held in Doha. Paul Koster, Chief Executive of the DFSA said, "The DFSA is keen to engage with its counterparts in the GCC and I am particularly pleased to be signing this MoU with Phillip Thorpe, a distinguished and experienced figure in the world of financial regulation. I am also pleased that we now have a formal arrangement with the QFC Regulatory Authority, with whom we have much in common. Both authorities are integrated regulators of international centers striving to embrace best practice and seeking to reflect the resolutions of the international standard-setters. This initiative should be seen as a mutual willingness to co-operate and share information to those standards." "In the past year, the importance of effective co-ordination and co-operation between regulators cannot be overstated. We are looking for better ways of working together to resolve problems and prevent their repetition. Agreements such as this will make a difference", Mr. Koster said.

Syria: Reforms continue

As the Damascus Securities Exchange (DSE) prepares to celebrate its first birthday on March 10, traders and staff alike will be heartened by figures that demonstrate a continued rise in trading volumes on the bourse. According to local business publication The Syria Report, volumes surged 55.7 per cent in the first week of February to S£157 million (US$3.5m), a record for the exchange. The DSE had already posted one new high in 2010, when trading volume hit S£130 million (US$2.9m) in the third week of January. The growth in volumes is impressive, considering that weekly trade figures in December were as low as S£33 million (US$750,000). The increase seems to suggest that investors are greeting the New Year with renewed enthusiasm for the bourse, following a slow start to trading when the DSE opened in 2009. Trading volumes for the first month of operation were a modest S£13.6 million (US$300,000), spread over only nine sessions. The growth in market activity suggests that a few of the teething troubles experienced by the market in its opening months are being resolved. Initially, a 2 per cent cap on price movements, coupled with limited trading of only four hours a week, led to an absence of liquidity on the bourse and a lack of appetite for trading. By the middle of last year, of 37,000 registered investors in the 11 listed companies on the exchange, only 1200 had actually engaged in any trading. In an attempt to attract new listings in December the authorities reduced minimum capital requirements for the main market from US$6.5 million to US$2.5 million. Time will tell whether the move will have a significant impact; currently, a major barrier to Syria’s myriad family-owned corporations listing on the exchange is not so much an absence of capital as an absence of necessary financial disclosure. Changing accountancy procedures, which may require further reform of the tax code, is arguably the most pressing requirement to increase the number of listings. (Source: OBG)

QInvest says to buy a 25-pct stake in India's Ambit

QInvest, Qatar's largest investment bank, will buy a 25 per cent stake in Mumbai-based Ambit Group for an undisclosed amount, the company said. The deal, the company's first investment in India, will help Ambit expand its investment banking, advisory and private wealth businesses, the statement said. The investment "will dramatically accelerate QInvest's ambitions in India, one of the world's fastest growing economies," QInvest CEO Shahzad Shahbaz said in the statement. "We see significant opportunities for our clients and ourselves across investment management, investment banking, private equity and brokerage," he added. In December, QInvest and Fortis Bank Nederland each committed US$50 million to a US$200 million sharia-compliant shipping fund aimed at providing financing to investors and ship owners hit by the global crisis. Last May, QInvest trumped two other bidders to buy a 44 per cent stake in the UK's Panmure Gordon, investing 23 million pounds in the 130-year-old stock-broking firm.

UAE’s Daman to launch US$55m mutual fund

UAE-based Daman Investments, a key player in asset management, brokerage and venture capital, said it will launch a Dh200 million (US$54.45m) mutual fund as it looks to benefit from a recovery in Gulf Arab markets. The fund, which targets an internal rate of return of 25 per cent a year over the life of the fund, will focus on blue-chip equities listed on Gulf-based exchanges, debt products and commodities. 'The fund has been designed to catch a bounce back in the markets,' Daman managing director Shehab Gargash told reporters. Stock markets in the Gulf led by Dubai underperformed in 2009, but may rise again on the back of an economic recovery and a positive outlook for oil prices. Daman will seed the fund, which has a two-year lifespan and can be extended by an additional two years. Daman Investments is looking to sell shares to the public by 2012 to strengthen its financial position, it said last year.

Kuwait: Shift in strategy

On February 6, the local press reported that the government had completed its policy agenda for the next three years, with the “focus on making Kuwait a financial and commercial hub”. This is likely to see a growing role for Islamic financial institutions (IFIs), which are an increasingly large and dynamic part of the country’s financial sector. IFIs have been flourishing worldwide in recent years, as the economies of the Muslim world have grown rapidly, and investors, companies and individuals have sought new forms of financing. Kuwait is no exception, and now has one of the world’s largest Islamic banking industries by assets. Kuwait has a range of IFIs, including three Islamic banks: Kuwait Finance House (KFH), the country’s biggest Islamic bank and one of the region’s largest IFIs, Kuwait International Bank (KIB) and Boubyan Bank. The Central Bank of Kuwait (CBK) has thus far not permitted conventional banks to open Islamic windows, which has helped the three players to build their client bases. Local non-bank IFIs include takaful (Islamic insurance) funds, which had a 14 per cent insurance market share in 2009, finance companies and sharia-compliant real estate investment firms. Generally, IFIs have been less affected by the global financial crisis and economic downturn than the conventional segment, as they tend not to invest in the sort of risky asset classes that have brought many institutions across the world to grief. However, during the years of breakneck portfolio growth in Kuwait, some banks failed to monitor risk closely enough. Kuwait’s sharia-compliant institutions could not be isolated from the country’s recession and real estate slump, as well as their exposure to the domestic stock market. KFH’s profits fell by 24 per cent in 2009 to KD157 million (US$544m) after a 43 per cent drop the previous year. Chairman and managing director Bader Al Mukhaizeem attributed the fall to the effect of the global crisis on the region. Similarly, Boubyan Bank posted an unrealized loss of KD17.1 million (US$59m) in the first three quarters of 2009. One reason for the shaky performance is a rise in provisioning; banks in the Gulf and beyond have had to increase provisioning considerably in the face of the market conditions, which has impaired profitability in both conventional and Islamic institutions. Indeed, KFH’s declining profit came against rising deposits, which grew 10 per cent to US$39.2 billion in 2009. (Source: OBG)

Qatar Barwa Bank bids for First Finance Company

Barwa Bank, a unit of Qatar's Barwa Real Estate, offered to buy at least 75 per cent of First Finance Company in a long-awaited deal as the new lender seeks a foothold in Qatar's banking sector. Barwa Bank said it will issue 1.54 shares for every share in First Finance Company to acquire at least 75 per cent and up to 100 per cent of First Finance Company, a Qatar-based financial services firm. First Finance Company received a takeover offer from Barwa in May last year and said then it had initially accepted. Barwa Bank in May last year received regulatory approval to start operations in Qatar. It said around that time it was considering buying financial and investment companies to help fund its property projects. Barwa Bank said in January it will purchase The First Investor, a Doha-based investment firm, in an all-stock deal.