BIMB Integrated Annual Report 2017

MANAGEMENT DISCUSSION & ANALYSIS THE MARKET LANDSCAPE GLOBAL Global growth was accelerating in 2017 with major central banks have raised their policy rates during the year. Similarly, the Asian currencies were mostly having turned around against the US dollar after severely battered in the past three years. Top of the lists was South Korean Won, followed by Malaysian Ringgit, Thai Baht, Singapore Dollar and Taiwanese Dollar, rising by 12.81%, 10.87%, 9.88%, 8.29% and 8.23% respectively. Consequently, equity indexes were also higher in the most of part of 2017, reflecting increasing risks appetite for the risky assets. Additionally, the crude oil prices were also on firmer footing, surpassing above USD60 per barrel between October and December as Organisation of the Petroleum Exporting Countries (“OPEC”) and several Non-OPEC countries have agreed to cap the oil production. This has paved the way for Islamic finance to scale into greater heights. According to the State of the Global Islamic Economy Report 2017/18 by Thomson Reuters, the Islamic economy continued to be at the cusp of major growth and widespread recognition in 2017. Sentiment across the board, from Halal Food, Islamic Finance and Modest Fashion, to Halal Travel, Halal Pharmaceuticals and Cosmetics, is overwhelmingly positive at 77%. The Report estimates that Global Muslim spend across lifestyle sectors was USD2 trillion in 2016, while the Islamic finance sector enjoyed USD2.2 trillion in total assets, a 10% increase from 2015. Going forward, Islamic finance assets are expected to grow by 9.40% CAGR to reach USD3.8 trillion in 2022. Additionally, governments across the globe, be it Muslims and Non-Muslims countries have been receptive to Islamic finance as a means to promote inclusive growth strategy. For instance, the Organisation of Islamic Cooperation (“OIC”) countries have been capitalising on Islamic finance to raise billions of dollars in funds, with Saudi Arabia has issued their first global sukuk worth USD9 billion rated A+/stable by Fitch while Tunisia preparing its debut sukuk issuance, and Nigeria to launch its maiden sovereign sukuk. Meanwhile, the Government of Hong Kong has listed USD1 billion sukuk on Nasdaq Dubai as part of their funding based diversification. One of the core strengths of Islamic finance is its willingness to address global development needs and support of SMEs. Such moves are highly significant for countries with sizeable Muslim populations such as Indonesia, Malaysia, Pakistan and India, where more than 50 percent of economic activity is generated by SMEs. Further propelling growth is the adoption of Islamic FinTech, be it the world’s first Shariah-compliant robo-advisory firm, or the first Shariah-compliant gold platform. Notably, such endeavors have been achieved through utilising crowdfunding with total assets were estimated at over USD2 trillion in 2016, and expected to surge to USD3.8 trillion by 2022. Islamic insurance (Takaful) and other financial products such as Murabhahah and Waqf, continue to expand as new markets open up throughout the world. Current Islamic banking assets* * Does not include undisclosed assets of most Islamic windows USD2,439 Bil 2022 Potential Market Size 2016-22 CAGR Growth %: 7.30% USD1,599 Bil 2016 Existing Market MARKET SIZE Current Islamic finance market assets* USD3,782 Bil 2022 Potential Market Size 2016-22 CAGR Growth %: 9.40% USD2,000 Bil 2016 Existing Market 48 BIMB HOLDINGS BERHAD Integrated Annual Report 2017