IFN Asia Forum 2012
Islamic Fund News opened the fourth edition of their Asia Forum today in Kuala Lumpur. Day one, which was Issuers Day, saw the speakers playing to a packed auditorium of some 520 delegates. Abdulkader Thomas, CEO of SHAPE Financial, did an outstandingly good job as chairman, moderating most of the panels, turning delegate observations into real questions and finishing with a masterfully concise résumé. Quite a performance.
One recurring theme was the vexed question of standardisation, whether regional or global. This reporter leans in the direction of transparent rules, but Afaq Khan, CEO of Standard Chartered Saadiq made a very good counter argument, stressing that “we need to keep it a bit loose for the sake of innovation. We will learn by trial and error.”
The point was nonetheless made that standardisation has a precedent (it was enforced by the Ottoman Empire) and is therefore not a new concept in Islam.
Another theme was the role of the central authorities (law, regulation and education) in developing Islamic finance. For instance, the Indonesia market is 90% Muslim but has not developed in Islamic finance. Leoni Silitonga, speaking for Indonesia, said that the government had to move first. Only when Islamic finance presented an attractive alternative would demand from the market place grow significantly. An opposite situation arose in Pakistan, where the government tried to install Islamic finance and this was rejected by the market place.
Cost and yield is clearly an issue everywhere. One pannelist, speaking as a treasurer, spoke of his concern about the continued attractiveness of Shariah compliant products after traditional markets recover.
One question launched a lively debate as to whether Shariah scholars should be paid and whether this did not lead to a conflict of interest. Luckily for the scholars, there was a consensus view was that they were professionals and deserved to be paid alongside the other advisers on a deal.
During the day there were several interesting case studies of sukuk. Take the example of Khazanah Nasional’s 2012 US$357m Exchangeable Sukuk (advised by CIMB Islamic). This is the first sukuk to be priced at a negative yield, yet people bought it because they wanted security – the company has good credit - and the deal was 3.4x oversubscribed. The problem of fixed pricing is overcome by taking the average price of the five preceding days at the moment of maturity.
Tuesday, 2nd October will see a return match by the Investors. ER