Emerging market pension funds ready for Sharia-compliance

Posted on November 11, 2013 by j.brockett

Global demand for Sharia-compliant pension funds could reach $190bn, according to the Global Islamic Banking Centre at Ernst and Young (EY).

Ashar Nazim, partner at Global Islamic Banking, EY, speaking to Gulf News, said that emerging markets such as Saudi Arabia, the UAE and Malaysia are seeing increased demand for retirement plans that are Sharia compliant.

The maturity of the sukuk market and Sharia-compliant equity indexes mean that there are sufficient assets available for many pension funds to begin their Sharia-compliant proposals, he added.

Within the GCC member states, the mainstreaming of Islamic finance means that there will be a boost to demand for pension funds to be inclusive and offer Sharia-compliant retirement alternatives.

Nazim said: “This is, however, the beginning of a long journey. It begs the question whether we have the criteria in place, and the structures and tools to enable the effective management of this emerging asset class. We believe there will be a gradual evolution over the next 18 to 36 months.”

According to Nazim, the challenges facing the shift towards Islamic pension funds include, operational changes, legal and regulatory issues and customer focus.

MENA IPOs decline in Q3

Posted on October 11, 2013 by j.brockett

Initial Public Offerings (IPOs) in the MENA region declined by 45.3% year-on-year (YoY) in the third quarter, a report by Ernst & Young has found.

However, according to the advisory firm, these figures are expected to pick up. Low levels of liquidity in the exchanges is one of the most prominent challenge facing the region, the report pointed out.

IPOs in the Middle East and North Africa raised a total of $138m in Q3. Oman’s Sebcorp Salalah Power and Water Company and Saudi Arabia’s City Cement were the offerings that made up this total.

Phil Gandier, head of transaction advisory services in the MENA region at Ernst and Young, highlighted a historically slow Q3 period and the fact that the summer months coincided with the holy month of Ramadan as major contributors to the decline.

Gandier said: “However, we have seen an increase in the number of companies in the region contemplating IPOs in the coming months so we expect activity to pick up.

“Going forward, the key challenge that the regional IPO market will face is the relatively lower levels of liquidity in the exchanges compared to international markets.

The choice of other exchanges and valuation differential may also present a challenge for regional bourses, although this will depend on the sector and ‘go-to-market’ credentials of individual companies, the report said, adding the increased number of announcements is an indication of the positive direction the IPO market is headed.

Gandier said: “There is an appetite to invest in profitable local companies that have scale and Pan-Arab operations. Within the Gulf, the Tadawul is expected to attract a large number of IPOs due to its high liquidity and the new facility of cross-listing for overseas companies.

“The Gulf region as a whole has many of the investment qualities that companies look for such as solid fundamentals and strong demographic trends,” he said.

Mena IPO values in first half of 2013 more than 50% up on 2012

Posted on July 9, 2013 by j.brockett

The value of Initial Public Offerings (IPOs) in Mena dropped in the second quarter of 2013, after nine IPO deals raised US$ 482.6million, compared with the US$ 1.6billion raised in the previous quarter, according to an update from Ernst & Young.

However, the total capital raised through IPOs in the first six months of this year reached US$ 2.1billion, 52% higher than the equivalent period in 2012, the report revealed.

In total there were eight IPOs on regional exchanges during the quarter: five in Tunisia, two in Saudi Arabia and one in Oman.

Phil Gandier, Mena head of transaction advisory services at Ernst & Young, said: “This is the highest Q2 IPO performance by volume seen in the past five years. Although the volume was up from Q2 2012; there were no big ticket IPOs to boost the overall value, apart from one outbound listing on the LSE.”

The capital raised in the first half of this year is the highest for the past five years, primarily due to Qtel’s US$ 1.3billion Asiacell Communications IPO in the first quarter this year.

“Whilst most MENA markets still remain slow, the flurry of small listings on the Tunis Stock Exchange shows that the country’s economy is improving after a period of depressed activity. Looking forward, IPO values are expected to remain relatively low in the third quarter of this year as activity typically slows down during the summer period,” Gandier said.

The largest IPO this quarter was an outbound listing by UAE healthcare company Al Noor Hospital, which raised US$ 342.7million on the London Stock Exchange (LSE).

Second largest was One Tech Holding in Tunisia, which raised US$ 51.4million on the Tunisian stock exchange followed by Aljazira Takaful in Saudi Arabia which raised US$ 28million on the Tadawul.