HSBC Islamic Hedging, Investment Grew Double-Digits in 2011

HSBC Holdings Plc’s (HSBA) Islamic risk management business posted double-digit growth last year on rising demand for Shariah-compliant hedging and investment products.

The bank has “more than 100 Islamic hedging and investment products, from about 10 products two and a half years ago,” Abhishek Mishra, head of multi-asset structuring at HSBC Global Banking and Markets, Middle East and North Africa, said at a conference in Dubai. He forecasts similar growth in the bank’s Islamic hedging and investment business in 2012.

While Saudi Arabia made up most of HSBC’s business last year, there has been growth among other Gulf Cooperation Council nations in 2012, Mishra said. The Islamic finance industry is forecast to more than double to $2.8 trillion by 2015, the Kuala Lumpur-based Islamic Financial Services Board said. The six- nation GCC, including Saudi Arabia and the United Arab Emirates, have a 25 percent share and Malaysia has 22 percent, Ernst & Young said in a report this month.

Speculation is forbidden under Islamic law, and derivatives are limited to hedging. Derivatives are contracts whose value is derived from stocks, bonds, currencies and commodities, or events such as interest rates or the weather.

The Manama, Bahrain-based International Islamic Financial Market and the New York-based International Swaps and Derivatives Association published standards for Islamic profit- rate swaps in March.

“HSBC has benefited from the global financial crisis, because as more foreign banks focus on their geographies and their existing products, we were able to take advantage of the gap,” Mishra said. HSBC is the biggest underwriter of Islamic bonds this year, according to data compiled by Bloomberg.

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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