Sukuk issuances to match or beat last year’s $32bn, says Fitch



Key issuers of Islamic bonds are expected to at least match their US$32 billion sales last year as governments seek funding to plug fiscal deficits and update legislation, Fitch said on Monday.

“Sukuk issuance should be supported in the medium to long term by the recent introduction and revamping of sukuk laws in some countries, the growing Islamic finance industry in these countries and increasing sovereign funding needs,” said the credit rating agency.

The GCC, Malaysia, Indonesia, Turkey and Pakistan issued $21.7bn worth of sukuk with maturity of more than 18 months in the first half of this year, up by 11.3 per cent from $19.5bn on the year-earlier period, Fitch said.

“Investor appetite for the countries included in this analysis moderately improved earlier this year, due to a hunt for yield in light of low rates in mature markets and by stabilisation of commodity prices,” the agency said. “The UK’s vote to leave the European Union has also reinforced the pressure on interest rates.”

Sukuk issuance could have been higher in the first half had some Arabian Gulf states opted for Islamic bonds rather than conventional paper. Abu Dhabi issued $5bn worth of conventional bonds, while Qatar sold $9bn.

Kuwait and Saudi Arabia could sell sukuk this year to finance their fiscal deficits, Fitch said.

Its report jars with the views of fellow ratings agency Standard & Poor’s, which said earlier this month it expects total sukuk issuance this year to drop as sovereigns choose conventional bonds over sukuk due to the complexity of the latter.

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Sarfira

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Rating: 2/5

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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THE BIO

Ms Davison came to Dubai from Kerala after her marriage in 1996 when she was 21-years-old

Since 2001, Ms Davison has worked at many affordable schools such as Our Own English High School in Sharjah, and The Apple International School and Amled School in Dubai

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If you go

The flights

The closest international airport for those travelling from the UAE is Denver, Colorado. British Airways (www.ba.com) flies from the UAE via London from Dh3,700 return, including taxes. From there, transfers can be arranged to the ranch or it’s a seven-hour drive. Alternatively, take an internal flight to the counties of Cody, Casper, or Billings

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Red Reflet offers a series of packages, with prices varying depending on season. All meals and activities are included, with prices starting from US$2,218 (Dh7,150) per person for a minimum stay of three nights, including taxes. For more information, visit red-reflet-ranch.net.

 

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“We are developing next generation capabilities to compete with and deter adversaries to prevent opportunism or miscalculation, and, if necessary, defeat any foe decisively.”

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Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

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Funding: $4 million

Investors: Privately/self-funded

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The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part three: the age of the electric vehicle begins

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Name: Raha
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Based: Kuwait/Saudi
Industry: Tech Logistics
Funding: $14 million
Investors: Soor Capital, eWTP Arabia Capital, Aujan Enterprises, Nox Management, Cedar Mundi Ventures
Number of employees: 166

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE. 

Read part four: an affection for classic cars lives on

Read part three: the age of the electric vehicle begins

Read part one: how cars came to the UAE

 

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Three stars

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How to wear a kandura

Dos

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  • Always ask for the dress code if you don’t know
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  • Wear 100 per cent cotton under the kandura as most fabrics are polyester

Don’ts 

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  • Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
The five pillars of Islam

1. Fasting

2. Prayer

3. Hajj

4. Shahada

5. Zakat 

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GP3 race, 12:30pm

Formula 1 final practice, 2pm

Formula 1 qualifying, 5pm

Formula 2 race, 6:40pm

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