Kuwait Finance eyes more Asia investments

By Syed Azman

KUALA LUMPUR - Kuwait Finance House the Gulf's second-largest Islamic lender by market value, is actively looking for more investments in China, India, Indonesia and Malaysia as well as fund-raising deals for customers, the head of its Asian operations said on Tuesday.

"For direct investments, we are looking at waste treatment, healthcare such as hospitals, fast-food industry, manufacturing, plantations and logistics," Salman Younis, who is based in Kuala Lumpur, told the Reuters Islamic Finance summit.

"There is ample money and liquidity available. Funding is not an issue, the issue is getting the right deals."

Younis said Kuwait Finance, which failed in its bid to buy a stake in Malaysia's fourth-largest lender RHB Group and some of the bank's branches, would focus on organic growth for now.

"If there is an opportunity to acquire a bank, we will see, but right now the focus is on organic growth. We are not talking to anyone, we are not looking at anyone," he said. Kuwait Finance opened its Asian headquarters in Malaysia in early 2006.

Younis said Asia's fund managers need to be more aggressive in bringing back funds from the Middle East which had left during 1997/1998 financial crisis.

"Fund managers here are still not reaching out to the investors. They are quite slow and not as aggressive as the American and European fund managers. It takes time, but Asia is on their radar," he said.

ISLAMIC BONDS

Younis also said the global credit crisis has not diminished appetite for Islamic bonds or sukuk, expecting higher volume in 2008 than last year.

"There is so much liquidity and lots of opportunities to invest, so we don't see any slowdown in the sukuk market.

"In the last quarter of 2007, a number of sukuks were put on hold because of speculation that some of the currencies of the GCC states might be 'depeg' or 'repeg' but nothing happened. So those issues will come out this year," he said.

Sukuks are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest.

According to Barclays Capital, about $30 billion worth of sukuk were issued last year.

The Islamic finance industry follows rules set out under sharia law whereby devout Muslims will not purchase assets that pay interest or earn profits from industries related to gambling, alcohol or pork, among other things. It favors instead a return on investment derived from underlying physical assets.

"The good news for Islamic banks is that from the crisis and because of the credit crunch, the spreads have gone up which means you can now get a better return on your deals," Younis added.

Asked if the lifting of a decade-old ban on offshore trade in Malaysia's ringgit currency would help encourage more investments from the Middle East, Younis said, "It's not something major but if you relax forex regulations, it makes it easier for investors."

Malaysia has banned foreign trade in the ringgit since 1998, when it imposed capital controls to shelter its economy from the Asian financial crisis. It largely lifted the controls in 1999 but kept the offshore ban to prevent ringgit speculation.

Majority-Muslim Malaysia wants to be a global Islamic banking hub, tapping into a fast-growing sector, but faces competition from Dubai, Bahrain and neighboring Singapore.