ASIA MARKET ROUND UP - THE MONTH IN LARGE NUMBERS

These facts (and figures) are extracted from Euromoney magazine (March 2009 issue) :

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1 trillion the yen value ($10.6 billion) of the corporate bonds the Bank of Japan says it will buy to try to inject liquidity into the stagnating market. The bank will buy bonds rated A or better held by banks in an effort to increase lending from financial institutions.

671 billion the combined dollar value of the economic stimulus packages announced by leading Asian nations so far this year, counting China ($586 billion), Korea ($43 billion), Taiwan ($17 billion), Australia ($11 billion), India ($9 billion) and Indonesia ($5 billion). More announcements are expected within the next few months, with Japan in particular reported to be considering a plan worth several hundred billion dollars.

19.5 billion the combined dollar value of the mining assets ($12.3 billion) and convertible bonds ($7.2 billion) that Chinalco announced it would buy from Rio Tinto, making it the largest outbound M&A transaction by a Chinese company ever. The previous holder of the record? Step forward Chinalco, which last year together with Alcoa bought $14.3 billion-worth of Rio Tinto stocks.

1.4 billion the dollar value of Kirin’s bid for 49% of San Miguel Brewery in the Philippines, announced on February 20. The Japanese drinks company’s approach is the largest outbound deal from Japan so far this year, and the second largest ever from the country’s food and beverage sector after Kirin’s $2.6 billion acquisition of National Foods in 2007.

12.7% the annualized rate at which Japan’s GDP is shrinking, according to fourth-quarter data from 2008. The country’s new finance minister, Kaoru Yosano, will have to face the grim situation without a stiff drink: his predecessor, Shoichi Nakagawa, stepped down after denying allegations he had been drunk during a G7 meeting in Rome.

ISLAMIC BANKS NEED CAPITAL INJECTION - NEWS!!!!

NEWS! NEWS! NEWS!

The Islamic Bank of Britain is operating in the red so far in 2009, after having posted a loss in 2008.

If you listen to some promoters of Shariah-Compliant banking, you’d have the impression that Islamic banks have all been untouched by the financial crisis. But, that certainly is not the case in Dubai, as we have noted recently. In Qatar, that country’s regime has just injected a huge sum of capital to shore up its banking sector, including two large Islamic banks.

Surprise? Well, I am not.

My main reasons are as follows :

1) Despite the fact that Islamic banks do not deal in interest, they are part of the global financial market that has tie up with interbank interest etc etc

2) They deal with real estate assets and everyone knows that during economic turmoil, the values of these assets are declining

3) Most of the Islamic banks mode of financing are murabaha-based (where profit rate has been fixed upfront), not profit and loss sharing like mudharaba and musyaraka

Therefore, these Islamic banks will be affected by the economic crisis, they are not invincible. However, the impact is not as great as their conventional counterparts.

It is hoped that people out there are interpreting the situation correctly and do not judge and conclude that if they are not dealing with interest, they are deemed to be invincible. One must remember that Islamic banks are still in its infancy stage (only been in business about 3-4 decades ago) as compared to the conventional banking. Despite the difference of philosophy behind each banking system, their paths are still intertwined one way or the other as Islamic banking has yet to develop to its true potential and according to its full Shariah requirement.

ISLAMIC BANKING AND FINANCE - SOCIAL FAILURE?

One thought-provoking article written by a professor in political economy from Durham University in the UK on Islamic banking and finance - social failure caught my attention, He wrote that among others, Islamic banking and finance (IBF) has failed to share the aspirations of Islamic moral economy (IME), which value system centred on human-centred economic development and social justice.

The author further elaborated on the philosophies that IBF should adhere to e.g., tawhid (unity), al-’adl wa’l-ihsan (justice and equilibrium), ikhtiyar (free will), fard (responsibility), rububiyyah (divine arrangement), tazkiyah (growth with purification) and khilafah (vicegerency).

Reality check – See around you!!!! Unfortunately, what the author wrote is true. What happens now is that the IBF is becoming more and more similar to their conventional counterpart. Some practitioners blamed it on the need to innovate and compete with conventional banking and finance, the easy way out is to replicate the features on the conventional products and just eliminate the word “interest” – that is Shariah compliant already.

Despite all the criticisms, I still harbour the hope that one day IBF will return to its Islamic roots and philosophies. I can guarantee that the Muslim world (or the whole world at large) will be a better place – sacrifices need to be made for the public interest and social justice. Lastly, I remembered a phrase uttered by Prof Zubair Hasan – “To each is due”. Despite the inequalities of distribution of income, Islam recognizes the need for the rich to help the poor, the sick and the needy (economic justice). In essence, his definition of Islamic economics says it all – Islamic economics is a study of human wants in the face of scarcity of resources with a view to maximize human falah.