Islamic finance sector in 2016 is expected to increase

Islamic finance sector is expected to grow to 14 percent next year despite the country's economic situation is not very encouraging.

Vice-President (Academic) of the University Global Islamic Finance (INCEIF), Datuk Dr. Syed Othman Alhabshi said this is because Islamic finance still has potential for growth in the country as growth at the global level is still high.

He said that from 2008 to 2013, Islamic finance has grown by an average of 17 percent per year and growth next year will slow down a bit because of the slow economy.

"I believe the sukuk will be the driver of this growth will be in addition to Islamic banking is expanding rapidly. Malaysia will also continue to be the leader in sukuk in the next year.
"In addition, Wealth Management is also expected to be one of the top growing and will be the focus," he said.

He was speaking after the launch of the book 'SRI (Sustainable and Effective Responsibility) and Case for Funds of Islam' by BNP Paribas Wealth Management Centre of Islamic and INCEIF (CIWM) here today.

Also present were the Chairman of BNP Paribas Malaysia, Datuk Abdullah Mat Noh and Promotion Unit Director of the Malaysia International Islamic Financial Centre (IFC), Nik Mohamed Din Nik Musa.

The book held by a joint venture between CIWM and MIFC to create awareness and sustainable relationship between sharia-compliant investments. Meanwhile, Syed Othman said economic growth in the third quarter of this year is not so favorable and expect the same thing in the next quarter.

Edra: Ringgit rebounded

Based on the model of exchange rates, the ringgit should hover at RM3.70 against the US dollar (US) without negative sentiment was affected mainly the issue of 1Malaysia Development Berhad (1MDB) since August.

According to MIDF Research, many believe that the ringgit will be recovered in the event of negative sentiment has subsided, supported by the global economy and financial markets are beginning to stabilize.

On this evening, the ringgit rebounded when it closed at RM4.2420 from RM4.3010 yesterday, after 1MDB agreed to sell energy assets Edra Global Energy Bhd. (Edra) to the General Nuclear Power Corporation (CGN Group) amounted to RM9.83 billion, in addition to the recovery of global crude oil prices.

"It is recognized in the financial market, the ringgit was under pressure due to negative sentiment, especially since a hot issue 1MDB around August. But the question is, what are the conditions necessary to look back retroactively applicable sentiment?

"However, the achievements earned it fair 1MDB scrutinized, whether financial markets will define it as a 'solve' the problem and help to reduce the negative sentiment in the market," he said in a brief statement on the economy yesterday.

CGN Group signed a Share Sale and Purchase Agreement (SSPA) with 1MDB to acquire a 100 percent stake in Solar Edra Sdn. Bhd., Edra Energy Sdn. Bhd., Powertek Energy Sdn. Bhd., Jimah Teknik Sdn. Bhd., Jimah O & M Sdn. Bhd., Mastika Lagenda Sdn. Bhd. and Tiara Land Sdn. Bhd.
President and Group Executive Director 1MDB, Arul Moto described the purchase by CGN Group takes a commitment of foreign direct investment (FDI) into the country and reflects their confidence in the Malaysian economy.

Meanwhile, HLIB Research analyst Daniel Wong said in a research note, there is some concern whether CGN Group is allowed to own 100 per cent of energy assets in Malaysia or the company needs to reduce its stake to local partners in the future.

He said the admission CGN Group in the energy sector of the country only control 3,640 gigawatt (GW) or 15.6 percent of power capacity in Peninsular Malaysia, with the majority still controlled by Tenaga Nasional Berhad (54.9 percent) and Malakoff (21.3 percent).

"But, CGN Group energy assets subject to the terms and conditions of the power purchase agreement (PPA) is tight, to protect the interests of both parties (CGN Group and BNP). So, not sure whether CGN Group allowed to own 100 per cent of the country's energy assets, "he said.

He said, in terms of benefits to the country as well, CGN Group has expertise in nuclear energy, which allows Malaysia to venture into the sector in the future.

"We believe this news (Edra asset sales) would provide relief to the park after the share price under pressure due to concerns about TNB had to pay more and expect the stock price will respond positively," he said.

source : Utusan Malaysia

Will Malaysia’s Growth Continue or Slow?

Malaysia’s challenges, along with the current economic climate, might make some people question whether Malaysia will be able to continue its surge in growth. After the elections in May of 2013, Prime Minister Najib Razak and his ruling United Malays National Organization (UMNO) party was reelected, but with a slim majority. Investors, market watchers and local voters are all looking for indications that the Malaysian government is serious in tackling the country’s challenges.

Given Malaysia’s fiscal situation, the government has decided to implement stricter fiscal regulations which include raising fuel subsidies and postponing some public infrastructure projects. The Prime Minister has also set his goal for the country’s overall GDP growth at about 4.0% to 5.0% growth in 2014.
Malaysia seems to be attempting to put its fiscal issues in order while at the same time convincing both foreign and domestic investors that the necessary reforms are being made to solve these problems. However, one could question whether these reforms are simply a public relations tactic used by the UMNO-led government to please some of the dissatisfied voters from the May 2013 election.

Furthermore, the reduction in government spending at a time when the global economy is slowing may result in the country cancelling or delaying some  public infrastructure projects. These include the cross-border high speed rail system between Singapore and the country, which could help enhance foreign direct investment, tourism, employment and trade. These are benefits that would help make sure that Malaysia remains one of the region’s most important financial centers and a major business destination for many years.

Malaysia’s Finance Issue

Malaysia now faces several economic issues. The country wishes to implement development projects such as Iskander Malaysia, the high speed rail track with Singapore and the growth of its Islamic Finance industry, while at the same time attempting to solve its debt problems. This balancing act will be a difficult task for Najib Razak, the country’s prime minister.

In an interview by Bloomberg News, Prime Minister Najib was quoted as saying “We’re very closely monitoring how we manage our macro position as well as our fiscal and debt to make sure that we will not be downgraded”. This was said due to Malaysia’s mounting concerns about its rising debt following a Fitch Ratings decision to cut the country’s credit outlook in July of 2013. Malaysia has run up its annual budget deficit every year since 1998.

In September 2013, Moody’s Investor Service indicated that Malaysia’s deficit measured as a percentage of overall GDP might exceed Najib’s target of 4.0%. The agency warned the Malaysian government that if its “fiscal house” is not put in order, any new targets will become “increasingly out of reach” unless further measures are taken. Moody’s currently has a debt rating of Malaysia’s government bonds at A3 with a stable outlook.

The Malaysian Ringgit currency, along with many currencies throughout Asia such as the Thai Baht and Indian Rupee, declined sharply in late 2013 along with the U.S. Federal Reserve’s change in monetary policy and decision to reduce quantitative easing (QE). During this time, emerging economies such as Malaysia suffered some of the worst capital outflows in recent history. This resulted in significant declines across the board for many regional currencies, including the Ringgit.

Ringgit Malaysia Issues can Recovered if 1MDB Issues Resolved

Malaysia's central bank governor Zeti Akhtar Aziz said on Monday the ringgit - Asia's worst performing currency of the year so far - is expected to show some recovery once issues surrounding troubled state fund 1Malaysia Development Bhd (1MDB) are resolved.

1MDB has been the subject of multiple investigations, amid allegations of financial mismanagement and graft. Prime Minister Najib Razak, chairs the fund's advisory board, has resisted calls for him to step down from government, but controversies continue to rage. 1MDB is seeking to reduce its $11 billion debt by selling power and property assets.