Interpreting Middle East Economic News and Analyzing Market Trends

Category: Islamic Finance

Dubai’s first IPO in over four years has no trades, but Al-Hilal Bank’s latest sukuk issue was 12 times oversubscribed

 

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Source: Amilin TV

 

Bank of London & the Middle East, also known as BLME, listed its shares on Nasdaq Dubai, the Emirate’s second exchange, on October 8th, but had no trading on its first day.  BLME is a six-year old Islamic bank based in London.  This marks Dubai’s first IPO in over four years.  Nasdaq Dubai is the smaller of the two exchanges in the Emirate.  The Dubai Financial Market (DFM) is the primary exchange, which has lately seen its highest trading activity since the financial crisis.  The DFM is up nearly 70% year-to-date on a lot of euphoria, which has spread across all sectors in the UAE, especially real estate and Islamic finance.  The latest sukuk issue to hit the market was 12-times oversubscribed… so what happened to this IPO?

 

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The next financial crisis will wipe out the lagest financial institutions. How will Islamic financial institutions fare?

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The headline in Forbes from this past March reads “Risk is Back.”  Financial institutions today are riskier and have more derivative exposure than they had prior to the Lehman failure in 2008.  More specifically, a handful of banks carry over 95% of the estimated $250 trillion global derivative exposure.  This is trillion with a ‘T’ and not billion with a ‘B’.  To put this in perspective, the total US GDP in 2012 was about $16 trillion.  It’s already a foregone conclusion that the next financial crisis will wipe out these mega-institutions as they will be too-big-to-save.  What will happen to Islamic banks and financial institutions as the dominoes begin to fall?

 

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NASDAQ Dubai looks to focus on sukuk and bond trading as equity trading never materialized

 

Launched in 2005 as the Dubai International Financial Exchange (DIFX) and rebranded in 2008, NASDAQ Dubai has struggled to get equity listings.  Of the seven equities listed today only one, DP World, trades with any significant volume.

 

Where the exhcange seems to have found a niche is in sukuk and bond trading. The exchange currently lists 12 sukuk issues and 5 bond issues.  Sukuk, of course, have gained a lot of attention lately and NASDAQ Dubai is aiming to capitalize on this.

 

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Islamic Banking in Libya: putting the cart before the horse

Even before the fall of Gadhafi, Libyan rebels were busy launching a central bank.  Never before in the history of revolutions have rebels setup a central bank before gaining control of the government.  This is strange enough in its own right and brings up many questions, but that’s another story.

 

One of the first items on the agenda for Libya’s new government was to convert all banks in the country into Islamic banks.  The main problem with this decision is that the government failed to come up with Islamic bankinh regulations before putting this law forward.  Now banks are stuck in limbo trying to figure out their way through this.

 

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Tatarstan plans first sukuk issue

The Russian Republic of Tatarstan is planning on being the first Russian republic to issue sukuk (Islamic bond equivalent).  Tatarstan is one of the wealthier Russian republics with a majority Muslim population.  Its entry into the sukuk market is another sign of the growing interest in Islamic finance, not only from the Middle East and Malaysia, but also from countries looking to tap into a new source of funding.

 

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