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View Full Version : Japanese bank to offer Islam bonds in ringgits



Uthman
07-31-2007, 09:16 AM
By Junko Fujita and Shunichi Ozasa
Bloomberg News
Monday, July 30, 2007

TOKYO: Japan Bank for International Cooperation, the Japanese government's main overseas lender, plans to sell Islamic bonds backed by products traded on the London Metal Exchange, an official said.

The Tokyo-based bank, known as JBIC, plans to sell Islamic debt for the first time as early as October, said Tadashi Maeda, director general of the bank's energy and natural resources finance department.

JBIC will sell $200 million to $300 million of such securities in Malaysia, to be denominated in Malaysian ringgit or dollars, he said.

JBIC is seeking to tap increasing demand for Islam-compliant investments and banking products as oil money floods the Persian Gulf. Sales of bonds that comply with Islamic law have totaled $16.3 billion worldwide this year, accounting for 89 percent of the record $18.3 billion sold during the whole of 2006, according to data compiled by Bloomberg.

"We want to see more oil money flowing into the Asian market, and Malaysia is the best place to sell the Islamic bonds," Maeda said in an interview last week.

Malaysia, where 60 percent of the 27 million people are Muslim, is the world's biggest issuer of debt complying with Islamic principles. The securities are gaining popularity in the Southeast Asian nation as the government seeks to turn Malaysia into the global center for Islamic finance.

Islamic law bans the payment or receipt of fixed interest as well as investment in the alcohol, tobacco and gaming industries. Islamic bonds are typically asset-backed securities that pay an agreed profit rate instead of a coupon.

Assets invested from oil revenues increased to about $1.5 trillion, Maeda said. About $500 billion of this amount is invested outside the Middle East, and only one-tenth of it goes to Asia, he said.

The bonds will be backed by JBIC investments in products traded on the London Metal Exchange, the world's largest metals marketplace, Maeda said, without specifying the contracts.

The bank will create a company that will manage the funds and hire a financial institution to oversee it, he said.

The price of the bonds will be determined by the performance of the contracts, said Maeda.

JBIC plans to swap proceeds from a ringgit-denominated bond sale into dollars because it lends more in the U.S. currency, he said.

The bank's next sale of Islamic bonds, which will be in dollars, will be in the Middle East, Maeda said.

http://www.iht.com/articles/2007/07/.../sxislamic.php
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