24 June 2014

CIMB-Principal Islamic Upbeat about Global Sukuk Growth

Kuala Lumpur: CIMB-Principal Islamic Asset Management (“CIMB-Principal Islamic”) hosted a media briefing today to share its views and updates on the global sukuk market. The presenters at the briefing were Michael Zorich, Chief Investment Officer, CIMB-Principal Islamic who presented on the global sukuk outlook, Russ Rowley, Managing Director, Global Fixed Income Research of Principal Global Investors who elaborated on the global fixed income outlook, while Wong Loke Chin, Head of Fixed Income, ASEAN Region of CIMB-Principal Asset Management Berhad shared his views on the local sukuk and fixed income outlook.

According to CIMB-Principal Islamic, fixed income investing in a post quantitative easing (“QE”) world present unique challenges as extraordinary monetary accommodation are gradually removed. CIMB-Principal Islamic noted that during periods of central bank policy transition, market volatility could be expected to rise. Many market participants had expected the removal of central bank support to hasten large rate increases and an exodus from fixed income assets. It also continues to see increased utilization of alternative, opportunistic and unconstrained fixed income mandates to allow greater flexibility to adapt to this evolving backdrop.

The presenters further highlighted the following:

  • Global growth continues to improve due to highly accommodative global central banks, a modest recovery in Europe, and stronger U.S. economy
  • The U.S. economy gains momentum as the year progresses, likely pushing interest rates modestly higher and the U.S. Federal Reserve (Fed) continues to reduce QE consistently throughout the year, finishing by the end of 2014
  • Fed will attempt to anchor front-end rates through forward target-rate guidance and begin raising the fed funds target rate mid-to-late 2015
  • Interest rate volatility and market technicals, including effects from Fed’s QE reductions, supply/demand imbalances, and seasonal liquidity, have the potential to cause temporary disruptions.

On the domestic front, Wong Loke Chin commented that the strong economic data release and the change of tone in the statement made by the Bank Negara Malaysia (BNM) during the May policy meeting raised expectations that a rate hike could arrive sooner rather than later. The first quarter of 2014 saw the gross domestic product (GDP) rose by 6.2% year-on-year, higher than consensus estimate, while BNM’s statement highlighted the need to adjust the degree of monetary accommodation to counter the threat of financial imbalances.

“We expect the demand and supply to remain healthy in 2014 with year-to-date total new gross corporate debt issuances including sukuks standing at approximately RM32 billion. For the full year 2014, we are projecting the total new gross corporate debt issuances of about RM70 billion, which is smaller than the past two years, as issuers are currently adjusting to the potential higher interest rates,” added Wong.

Also speaking at the briefing, Ramlie Kamsari, Chief Executive, CIMB-Principal Islamic said, “CIMB-Principal Islamic is dedicated and strives to provide the best service and guidance to our valued customers. We believe this ensures our relationship with our clients will be a long and satisfying one. With our commitment and support towards the Malaysia International Islamic Financial Centre’s (“MIFC”) agenda to set the stage for Malaysia to position itself as a centre for the offering of Islamic financial products and services, CIMB-Principal Islamic will continue to provide thought leadership standpoint to fortify our position as one of the leading global Malaysian-based Shariah-compliant asset managers.”

CIMB-Principal Islamic has stepped up its efforts on the international front and shifted its focus towards their client while strengthening their global outreach. As at 31 December 2013, CIMB-Principal Islamic’s asset under management (AUM) stands at RM7.57 billion (USD 2.31 billion). It manages one of the largest portfolios for global sukuk and domestic sukuk, having won breakthrough mandates in UAE, Brunei and Saudi Arabia. CIMB-Principal Islamic offers global and regional sukuk solutions to domestic and foreign institutional clients, who want and seek diversification in their portfolio.

From left: Principal Global Investors Managing Director of Global Fixed Income Research, Russ Rowley, CIMB-Principal Islamic Chief Executive Officer Ramlie Kamsari, CIMB-Principal Islamic Chief Investment Officer, Michael Zorich and Head of Fixed Income, ASEAN Region of CIMB-Principal Asset Management, Wong Loke Chin at the CIMB-Principal Islamic media briefing on the global sukuk market.