Interview with Shiro Kutsuma, CEO of Japan-based Deira Asset Management

Interview with Shiro Kutsuma, CEO of Japan-based Deira Asset Management

Sensing opportunities in the cash rich Middle East, Daiwa Asset Management overcame numerous challenges to become the first Japanese-based company to offer Shari’ah-compliant ETFs. Mohamed Hairul Borhan caught up with Shiro Kutsuma, Executive Officer at Daiwa’s Global Business Development Department.

Read the interview …

Toyota considers Shariah bond to help Malaysian business

Toyota considers Shariah bond to help Malaysian business

Toyota is considering issuing a bond that complies with Islamic law to help its expanding business in Malaysia, a company spokeswoman said.

The Malaysian financial authorities have given UMW Toyota Capital, based in Petaling Jaya, Malaysia, permission to issue up to 1 billion Malaysian ringgit, or $312 million, in Islamic bonds.

Under Shariah, or Islamic law, interest is banned and purchasers of Islamic bonds, or sukuk, instead would receive a dividend from UMW Toyota Capital.

“We are looking to issue Islamic bonds with a view to expanding our loan and lease business in Malaysia,” said Mio Sugito, an assistant manager at Toyota Financial Services. “We are considering when to issue, and could go ahead as early as this month.”

The company began offering Islamic loans in Malaysia in November 2005, and it started leases in August 2007, using cash borrowed from banks under Islamic law.

Apart from reducing the dependence on bank loans, the move would make it easier for local people to take out a loan with the company, Sugito said.

These loans and leases make up about 15 percent of Toyota’s total of ¥50 billion, or $484.6 million, in loan and lease business in Malaysia, and Sugito estimates Toyota’s business in Islamic finance could expand to approximately 20 percent of all business “over the next year or two.”

This would be the first time Toyota has raised money using Islamic finance.

The Malaysian unit of AEON Credit Service issued a series of Islamic bonds in 2007, and other companies are expected to follow to answer the religious and social needs of an expanding Islamic middle class in countries like Malaysia and Indonesia.

Oil exports rose significantly from 2002 to 2006 in the area, and rising prices for crude oil have made the Middle East a lucrative source for companies and organizations looking to raise cash.

Sukuk issues rose from $800 million in 2002 to $20.5 billion in 2006, with an outstanding issuance of $50.5 billion as of the end of 2006.

Total worldwide assets of Islamic financial institutions exceeded $250 billion as of December 2005 and are growing 15 percent annually, according to the International Monetary Fund.

UMW Toyota Capital is 70 percent owned by Toyota Financial Services of Nagoya, Japan. Toyota Financial Services is the finance arm of Toyota Motor. The Malaysian financial services provider CIMB Group is set to be lead manager of the bond issue.

Credit crisis delays new plant

A senior Toyota executive said Monday that plans for an auto assembly plant in Mississippi were being delayed by the U.S. credit crisis and worries about U.S. auto sales, The Associated Press reported from Tokyo.

The vehicle assembly plant, being built in Blue Springs, Mississippi, had been expected to be running in late 2009 or early 2010, said Toyota Motor’s executive vice president, Mitsuo Kinoshita.

That date has been changed to mid-2010 after Toyota reviewed the plans and considered the slowdown in the U.S. car market after the subprime mortgage crisis, Kinoshita said in Tokyo.

“We made adjustments within a certain range of time,” he said. “The change wasn’t that critical.”

Toyota had been on a roll with its small cars and gas-electric hybrids as oil prices rose.

But the company expects rough months ahead because of an expected decline in U.S. sales and a weak dollar that will lower the value of its overseas earnings.

Last week, Toyota forecast that for the financial year ending March 31, 2009, its annual sales will drop for the first time in nine years and its profit will decline for the first time in seven years.

Toyota’s list of problems is growing and includes rising material and energy costs and a stagnant auto market in Japan.

Japan To Raise First Sovereign Islamic Bond In Malaysia Next Month

Japan To Raise First Sovereign Islamic Bond In Malaysia Next Month

Japan will issue its first sovereign Islamic bond or sukuk, of between US$300 million and US$500 million, in Malaysia next month, a senior official of the Japan Bank for International Cooperation (JBIC) said today.

“It will be issued after Chinese New Year and we hope it will be well-subscribed by the Gulf states,” said Tadashi Maeda, director-general for energy and natural resources finance department of the bank.

The government-backed JBIC is Japan’s biggest overseas lender.

The issue will be the first by a major economy to tap capital from the oil-rich Muslim Gulf states. It comes at a time when oil prices have soared to record highs.

Details of the issuance will be finalised close to a Feb 23 Islamic finance seminar in Japan to which Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz has been invited to make an address, Maeda told Bernama.

“We will finalise it around that time. We have studied this for a long time, as this is the first sovereign Islamic bond to be issued by Japan,” he said on the sidelines of a two-day Islamic finance seminar organised by the Hong Kong Monetary Authority and the Malaysia-based Islamic Financial Services Board (IFSB).

Maeda said the bond will have a maturity of five to seven years.

Malaysia, a pioneer in Islamic finance with three decades of history, is the world’s biggest sukuk issuance centre with over US$56 billion or 62 percent of global sukuk issues.

Sukuk is fast growing at an annual rate of 40 percent.

The global Islamic financial sector is estimated at between US$700 billion and US$1 trillion with total assets exceeding US$250 billion.

Dr Zeti, in her keynote address at the seminar here, said strong demand for sukuks have been spurred by the high levels of surplus savings and reserves in Asia and the Middle East.

The high demand was evidenced by oversubscription ranging from two to 13 times and this has pushed down the cost of issuance by at least 10 to 20 basis points, she said.

Islamic financing forbids any transactions that are not according to the tenets of the religion including a ban on interest, alcohol and gambling.