Hong Kong visits Dubai to promote Islamic Finance opportunities in China

Hong Kong visits Dubai to promote Islamic Finance opportunities in China

This sounds a little absurd but actually makes perfect sense. This morning a high-level delegation of Hong Kong financiers held a seminar for 200 guests in Dubai to promote the Chinese special economic zone as a gateway to Shariah-compliant fund-raising and investment in China.

Deputy chief executive of the Hong Kong Monetary Authority, Eddie Yue said: ‘Some people have expressed skepticism about a role in Islamic Finance for Hong Kong. But local market players have been quick to develop Shariah compliant products.’

The first Islamic fund introduced by a local bank was approved late last year and is an index-tracking fund for the Dow Jones Islamic Market China/Hong Kong Index. Then in December the Hong Kong Mortgage Corporation signed a joint venture agreement with Malaysia’s Cagamas Berhad to develop Islamic mortgages.

‘What makes Hong Kong a natural destination for Islamic funds is our deep and highly liquid capital markets,’ Yue added. ‘Almost all the most actively traded financial instruments are available for exchange in Hong Kong, and that gives Islamic investors a much wider choice of where to place their funds.’

In a keynote address, Dr Nasser H. Saidi, chief economist of the Dubai International Financial Centre Authority said that Hong Kong could also have role for developing ‘straightforward or convertible sukuks’ for sale to burgeoning Chinese savers to fund projects in the Middle East.

‘There is a rapid integration of Shariah compliant products into mainstream global finance,’ he added. ‘In Dubai the next move will be to centralize Islamic finance with a single DIFC Shariah Board to simplify and standardize the issuing of sukuks. We will be developing our links with Hong Kong.’

However, Chinese IPOs have dried up in Hong Kong this year, after a record $76 billion was raised in local capital markets in 2007. Some attendees at the seminar thought Hong Kong was now looking for the next big thing in global finance and was late in catching on to Islamic Finance.

‘It may be true that Hong Kong has started development more recently,’ said Yue. ‘But so long as the demand is there, it is never too late for Hong Kong to contribute to this vibrant growth sector.

‘The abundance of oil-driven liquidity generates a huge appetite for investments that comply with the tenants of Islam, which can not be satisfied within the Gulf area alone. Such investments can be found in the emerging markets of Asia, especially in China which is best accessed from Hong Kong.’

With a population of 1.3 billion people and a GDP that has been growing in excess of 10 per cent for the past decade, it has hard to argue against investment in China as a long term proposition.

Several other speakers stressed the scale of the opportunity and the strengths of Hong Kong as a platform with its strong commercial links and legal system. But it is clear Islamic finance in China will be a two-way process both for investment into the Middle East through sukuks and for investment into the growth story of China.

China sets sights on Islamic finance

China sets sights on Islamic finance

CHINA, the new economic powerhouse and one of the world’s fastest growing economies, has set its sights on Islamic banking and finance.

The US$3.43 trillion (RM11.11 trillion) economy plans to woo Islamic banking and finance institutions to the country by establishing an Islamic finance hub.

Islamic finance, with global assets worth over US$1 trillion (RM3.24 trillion), is now among the fastest growing sectors in international finance.

Shenyang, the largest city in northeast China, has started the ball rolling by seeking Malaysia’s expertise in Islamic banking and finance to help establish an Islamic finance centre in the region.

If the plan materialises, Shenyang will become the first Islamic banking and financial hub in the country of 1.3 billion people.

The plan to establish Islamic finance centre would complement Shenyang Finance Development Target 2010.

Under the target, Shenyang, which is the capital city of Liaoning province, will be developed into a regional finance centre that houses financial institutions, financial markets, advanced financial facilities and efficient financial services by 2010.

With a population of 7.2 million and relatively high income per capita, Shenyang itself provides a ready market for Islamic banking and finance products.

Shenyang, which was the capital of China until the relocation of the capital to Beijing after the fall of Ming dynasty, is now the base for equipment and manufacturing industry.

Islamic Banking and Finance Institute (IBFIM) managing director and chief executive officer Datuk Dr Adnan Alias said if the Chinese community in Malaysia adopts Islamic financial products, imagine the market in China if the people there become aware of the products.

“After all, the Chinese are known to be rational consumers, especially in the financial sector,” he said.

On January 29, the Shenyang authority inked a memorandum of collaboration with its Malaysian partners, IBFIM and the Kuala Lumpur Chinese Assembly Hall (KLCAH).

Under the agreement, IBFIM will work with KLCAH to provide the Shenyang authority with syariah advisory and consultancy services and training in Islamic banking and finance.

They will also provide education to Shenyang’s people and the authority on the awareness of Islamic finance as well as the significance of Islamic finance to the society and business.

IBFIM will also conduct various domestic and international training and development programmes on Islamic banking, takaful and Islamic capital markets.

Adnan said currently, there are no Islamic banks in Shenyang and this is the first time the authority is collaborating with any party on Islamic finance.

Director of administrative committee of Shenyang Finance and Trade Development Zone’s investment bureau, Yin Hongwu, said initially the Islamic banking and finance products would be targeted at over 100,000 Muslims in northeast China.

Later, it would be spread to the 100 million people in northern China.

He said the Shenyang authority has no targeted time frame for the establishment of an Islamic finance hub in the city or the targeted size of investment that it expects to attract in the Islamic finance sector.

“It is in the planning stage,” he said.

The introduction of Islamic banking and finance products to Shenyang is expected to benefit the industrial players and complement the conventional banking and financial products there.

Among the industries in Shenyang include mechanical processing, metallurgy, chemical industry, medicine, light textile, electron, car, aviation and construction materials.

Currently, Shenyang has 59 financial institutions including 25 banks, 25 insurance firms, seven securities branch agencies, two futures agencies, with more than 40,000 practitioners engaging in finance.

Since the opening-up of financial industry of Shenyang in 2004, nine foreign-funded banks and five wholly foreign-owned insurance companies have set up branches or representative offices in the city.

Elaborating on the collaboration with Shenyang authority, Adnan said IBFIM will help Shenyang authority to set up an Islamic financial community on the allocated 120ha site.

“We have been invited by the Shenyang Province Authority. They will give us a piece of land to conceptualise and develop it into an Islamic financial community complete with commercial and residential entities within the enclave,” he said.

He said IBFIM would submit the proposal for the development of the community in the third quarter of the year.

Meanwhile, KLCAH secretary general Ng Thien Phing told Business Times that three months ago, Shenyang authority has asked KLCAH to look for an adviser to help them establish Islamic banking and finance.

“They plan to set up Islamic banking and financial centre in Shenyang, so they need to understand how Islamic banking works,” he said.

As a start, IFBIM and KLCAH will come out with a series of articles on understanding Islamic finance in Chinese dailies.

Ng said in May this year, a seminar on trade promotion will be held in Kuala Lumpur to introduce Shenyang to potential investors in Islamic banking and finance.

A month later, IBFIM’s Adnan will lead a delegation, comprising bankers and businessmen, to Shenyang to explore the potential in the province.

The delegation is expected to include bankers and businessmen from Middle East.

“They want Malaysia to be a platform to attract Middle Eastern Islamic banking and finance institutions to Shenyang. This is because Malaysia has good relations with Middle East and the country is also the chairman of OIC (Organisation of Islamic Conference),” he said.

Ng said Shenyang has also asked KLCAH to establish relations between the Muslim community there and the Malays in Malaysia.

They also invited Malaysian ministers to visit Shenyang, he added.

Islamic investors focus on India, China

Islamic investors focus on India, China

Shifting political sands in America and Europe, especially after the 9/11 terror attack and concerns of a probable slowdown in developed economies are encouraging Islamic investors to turn their focus into growth economies like India and China.

Although there has always been a talk of Islamic investors shifting their investment focus to emerging economies, the real trend of investing in India caught up in 2007.

If one goes by numbers, the first real ‘all-Islamic’ finance deal materialised in October 2006 when Bahrain-based Gulf Finance House and the Maharashtra government joined hands to take up the Energy City India project.

Gulf Finance House promised to invest close to $2,000 million for the project. Since then, there has been four major Islamic private equity investments in India, all in 2007.

According to Islamic Finance Information Service (IFIS), National Bank of Dubai along with Velcan Energy Holdings (Dubai) are investing close to $140 million for the Velcan Hydro Power Plant in Arunachal Pradesh.

Saudi Economic and Development Company (Sedco) and Bearys Group have come together to invest $20 million for the Bearys Global Research Triangle in Bangalore. HSBC Amanah will invest $50 million in Srei Projects while Gulf Finance House will invest $10,000 million for the Indian Economic Zone in Mumbai.

“Robust growth, requirement for huge investment in areas like infrastructure and strong legal framework (which protects foreign investors) are some of the reasons why Islamic investors are flocking into India. This number is expected to jump by 100% in 2008. We are expecting investments in the range of 10 to 15% this year,” said Bearys Amanah Investment CEO, Shariq Nisar, who is also an expert in Islamic finance.