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Question 1
When was the Second DanaInfra
Retail Sukuk offered?
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Question 1
When was the Second DanaInfra Retail Sukukoffered?
The Offer Period of this Second DanaInfra RetailSukuk is from 9.00 a.m on 24 October
2013 to 5.00 p.m on 15 November 2013
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Question 2
What is the objective of Exchange
Traded Bond (ETBS) or Sukuk?
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Question 2
What is the objective of Sukuk?
The Syariah-compliant Retail Sukuk was offered
to the general public and retail investors who wishto invest in the Exchange Traded Bond / Sukuk
(ETBS) and participate in funding the
development of the nations key infrastructure
project i.e. the Mass Rapid Transit (MRT) Poject.
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Question 3:What are the characteristics of
ETBS?
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Question 3:Characteristics:
Amount : Up to RM100,000,000.00 Nominal
Value Tenure : 15 years
Profit rate : 4.58% per annum
Fixed income security/ Bond
Trade on stock market
Guarantee by Malaysian Government
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Question 4
Why should investors put their
money in ETBS?
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Question 4
Why should investors put their money in ETBS? Flexibility and Ease of Trading: ETBS are traded on
Bursa Malaysia, making the buying and selling ofETBS as easy as trading in shares.
Transparency: As ETBS are listed on the bourse,
investors will have access to real-time prices andvolumes, just like shares. This will enable investors tocontinuously monitor their investments and receiveup-to-date information.
Diversification: Investors can diversify their portfolio to
include ETBS to complement their investments inother asset classes such as equities, derivatives, unittrusts, etc.
Additional Income Stream: Investors can benefit froma steady income stream through regular coupon
payments.
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Question 5:
What are the risks when you invest inETBS?
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Question 5: What are the risks? Credit risk
This risk arises if the ETBS issuer is unable to pay thecoupon payment on the coupon date or the principalamount to the lender at maturity. Government bonds
and sukuk are backed by the central government,thus deemed to have a low credit risk.
Market riskThis is the risk of price fluctuations and is impacted bythe demand and supply in the market.
Interest rate riskValuation of the ETBS may be affected by thechanges in interest rates e.g. if the interest rate rises,ETBS prices will fall as investors may relocate theirinvestment to capture a rise in interest rates availablein other instruments, for example, in bank deposit.
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Question 6
How should I invest in ETBS?
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Question 6
How should I invest in ETBS?
ETBS trade like stocks, and are subject to the
same trading payment and settlement rules (T+ 3).
You will need to visit your nearest Participating
Organisation (stock broking firm registered with
Bursa Malaysia) to open a securities trading
account and Bursa Central Depository System
(CDS) account.
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Question 7
What are the differences betweenCommercial and Islamic Banking?
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Financial Markets
What is Financial Markets?
Channel funds from savers to investors, thereby
Promoting economic efficiency
Affect personal wealth and behavior of business
firms
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Major Financial Markets
Bond Market
Stock Market
Foreign ExchangeMarket
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Bond Market
Bonds are an example of a debt contract.
A debt contract is simply a promise to repay
an amount in the future in exchange for funds
now.A bond is a kind of a debt contract that is
marketable, that is it can be bought and sold
in a market.
For example, to raise funds, Proton Holdingsmight sell a bond, which is a promise to repay
the money plus interest some time in the
future.
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Stock Market
Stock represents share/ownership in the company sothat stockholders can vote on who manages thecompany.
Owner of stocks may buy or sell their share in the stockmarket (e.g. London Stock Exchange, KLSE)
Firms/company may raise their fund through InitialPublic Offerings (IPO)
Stock Price volatility Stock Price Bubbles
Technology bubble in 1990s?
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Foreign Exchange Market
It is the activity of funds transfer from onecountry to another
There are a variety of different currencies in
the world: dollars (US), Yen (Japan), Euros(13 nations of the European Community)
among many others.
The value of currencies differs from one
another and subject to international trade. The market where currencies are exchanged
is called the foreign exchange market.
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Classification of Financial
Markets
1. Primary Market New security issues sold to initial buyers (often behind
closed doors)
Investment banks typically underwrite securities (i.e.
guarantees a price for the security and then sells it to thepublic)
2. Secondary Market
Securities previously issued are bought and sold. E.g.:
NASDAQ, Futures, Options, Foreign Exchange
Exchanges
Trades conducted in central locations (e.g., New York Stock
Exchange, NYSE; London Stock Exchange, LSE)
Over-theCounter Markets
Dealers at different locations buy and sell
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Methods of Raising
Private Sector Funds
Debt Markets Short-term (maturity < 1 year): Money Market
Intermediate-term (1year < maturity < 10 years)
Long-term (maturity > 10 years)
Equity Markets
Common stocks: claims to share in assets and net
income
No maturity date; periodic payments known as
dividends
Capital Market
Intermediate + Long Term Debt + Equity
Examples: Bonds, mortgages
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Financial Market Instruments
What are the kinds of securities traded in financialmarkets?
Money Market Instruments
Because of short term to maturity, debt instruments
traded in the money market do not have much
fluctuation in their prices, and hence are the least
risky
Capital Market Instruments
Debt and equity instruments with maturities greater
than a year; these have much greater fluctuations
in their prices (compared to money market
instruments) and as such are considered more risky
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Examples: Money
Market Instruments Treasury Bills
Issued by US govt, with 1, 3, and 6 month
maturities.
Pay a set amount at maturity, and have no interest
payments; effectively pay interest by selling at adiscount.
Negotiable Bank Certificates of Deposit
CDs are debt instruments sold by banks to
depositors that pays an annual interest of a givenamount, and pays back the original purchase price
at maturity
Commercial Paper
Short term debt instrument issued by large banks
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Examples: Money Market
Instruments
Repurchase Agreements
Repos are effectively short term loans
(usually with a maturity of less than 2
weeks) for which T-bills serve as collateral.The most important lenders in this market
are usually large corporations.
Federal (Fed) Funds
These are typically overnight loans of
reserves between banks, of their deposits at
the Federal Reserve.
xamp es: ap a ar e
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xamp es: ap a ar eInstruments
Stocks These are equity claims on net income and assets of a
corporation. Issue of new stocks in any given year is typically quite small,
although the total value of stocks exceed that of any othertype of security in the capital markets.
Mortgages Mortgage market is the largest debt market in the US Residential mortgages are approximately 4 times the amount
of commercial and farm combined.
Corporate Bonds
Long term bonds issued by corporations with very strongcredit ratings. Typical corporate bond sends the holder an interest payment
twice a year and pays off the face value when the bondmatures.
Some convertible corporate bonds allows the holder toconvert them into a specified number of shares of stock at anytime up to the maturity date.
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Comparison between Bond and
Equity
Bonds/Sukuk Shares
Bonds/Sukuk are Debt Securities Stocks are Equity Securities
Bonds/Sukuk holder - they are the
owner of a bond asset and do not
have rights to the ownership of the
company
Shareholder - an owner of the
company
Steady flow of payments known as
coupon/dividends
Dividend payments based on the
policy and performance of the
company
Generally less volatile Impacted by market volatility and
forces
Time limit or maturity period Do not have a maturity period, unless
delisted
Trade size is 10 units Trade Size is 100 units
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Quiz:
What are the differences betweenCommercial and Islamic Banking?
Diff b t C ti l
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Difference between Conventional
and Islamic bankingConventional Banking Islamic Banking
Money is a commodity besides medium ofexchange and store of value. Therefore, it
can be sold at a price higher than its face
value and it can also be rented out.
Money is not a commodity though it is used
as a medium of exchange and store of
value. Therefore, it cannot be sold at a
price higher than its face value or rented
out.
Time value is the basis for charging
interest on capital.
Profit on trade of goods or charging on
providing service is the basis for earning
profit.
Interest is charged even in case the
organization suffers losses by using
banksfunds. Therefore, it is not based
on profit and loss sharing.
Islamic bank operates on the basis of profit
and loss sharing. In case, the businessman
has suffered losses, the bank will share
these losses based on the mode of finance
used (Mudarabah, Musharakah).
While disbursing cash finance, running
finance or working capital finance, no
agreement for exchange of goods &
services is made.
The execution of agreements for the
exchange of goods & services is a must,
while disbursing funds under Murabaha,
Salam & Istisna contracts.
Conventional banks use money as a
Islamic banking tends to create link with
the real sectors of the economic system by
using trade related activities. Since, the
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