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ASSET MANAGER, LCP, LAUNCHES NEW FUND ON BACK OF STRONG INTEREST FROM SHARIA-CONSCIOUS INVESTORS

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ASSET MANAGER, LCP, LAUNCHES NEW FUND ON BACK OF STRONG INTEREST FROM SHARIA-CONSCIOUS INVESTORS
  • 17% of total investment in LCP’s Prime London Residential funds, structured to be Sharia-compliant, has come from Sharia conscious investors.
  • This outstrips the global financial market where Sharia-compliant investment makes up just 1%.
  • Demand for Sharia-compliant residential products is evenly split between corporate investors/ family offices (52%) and individual HNW investors (48%).
  • 63% of Sharia-compliant investment is from international investors in the traditional heartlands of Islamic Finance.
  • The MENA region makes up the largest proportion of Sharia investors at 48%, with 10% of Sharia investment coming from Malaysia.
  • 38% of Sharia investment is from British Muslims.
  • The average individual investment from Sharia-compliant investors is double that of non-Sharia investors.
  • The average individual investment from MENA investors is 57% greater than the overall average and 4.5 times higher than from British Muslim.
  • For Malaysian investors, the average individual investment was 7% higher and 3 times higher than from British Muslim.
  • Weak sterling and the search for safe asset-backed investment is fuelling demand from Sharia conscious investors.

The demand for Sharia-compliant investment solutions in UK real estate has grown significantly since the launch of the Government’s Sovereign Sukuk, investing in commercial property, 3 years ago. Finance from the Gulf and Malaysia has played a significant role in real estate developments in the UK, such as The Shard, Battersea Power Station, the Olympic Village and Chelsea Barracks. Now, Sharia conscious investors are making a clear call for products within the sector as they increasingly look at ways of diversifying their portfolios. This is particularly true now as the pound remains weak against other currencies, especially for those which are dollar denominated. Global economic and political uncertainty, heightened by the US presidential election, is providing added incentive for Sharia investors to look at safe haven investments such as London property.

London Central Portfolio (LCP) was the first company in the UK to offer Sharia-compliant residential funds, which invest in Central London’s buoyant Private Rented Sector. They have already seen strong demand with Sharia-conscious investors providing 17% of the total investment in their funds. This far outstrips global financial markets in general where Sharia-compliant assets make up just 1%. Currently, demand for LCP’s residential real estate products is evenly split between corporate investors/family offices (52%) and individual HNW investors (48%).

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In line with the Sharia sector in general, the majority of interest in LCP’s products, at 63%, has come from international investors in the traditional heartlands of Islamic Finance. Investors from the MENA region made up the largest proportion of Sharia investors at 48%. 10% of investment also came from Malaysia, a well-developed Islamic financial region.

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International investors, however, were not alone in their search for accessible Sharia-compliant real estate products. With its attractive Central London residential focus and LCP’s strong relationships with specialist Islamic Finance IFAs in the UK, the company also saw 38% of Sharia investment coming from British Muslims.

With limited Islamic Finance products available in the space and strong projected returns in excess of 10% per annum, the average individual investment from Sharia-compliant investors was double that of non-Sharia investors. Individually, investors from MENA and Malaysia deployed the largest sums of capital into LCP’s funds.

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From the MENA region, the average individual investment was 57% higher than the total average and 4.5 times higher than was invested by British Muslims. For Malaysian investors, it was 7% higher and 3 times higher than was invested by British Muslims. For UK Sharia-compliant shareholders, often subscribing through tax-efficient savings schemes such as Islamic SIPPs and ISAs, investment was 65% lower than average.

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LCP is soon to launch London Central Apartments IV (LCA IV) which will offer a Sharia-compliant option. Investing in the mainstream Private Rented Sector (PRS) in Prime Central London (PCL). LCA IV will target a total return on investment of around 100% including annual interim distributions of 5% from year 3. It will selectively acquire properties with added value potential across all the prime postcodes. These will undergo a full refurbishment to appeal to the mainstream rental sector. The minimum investment is £100,000 (or less subject to eligibility).

As well as providing buying power and diversification into this asset class, LCA IV offers significant tax advantages for investors, not available if they ‘go-it-alone’ and invest directly. It will not be subject to the forthcoming reduction in mortgage interest relief, nor the additional rate Stamp Duty. For the offshore investor, it is exempted from both non-resident CGT and the forthcoming look-through non-dom inheritance tax.

Keith Leach, Chief Commercial Officer for Al Rayan Bank comments: “Two key objectives for Al Rayan Bank have been to provide bespoke Sharia-compliant investment opportunities and to expand our presence in the real estate sector – particularly in Prime Central London, a favourite of both our Middle Eastern and British clients. We are keen to strengthen our product range by bringing new, innovative products to our clients, so exploring the residential space was an obvious next step. We believe this is an exciting opportunity for investors.”

FaizalKarbani, CEO of Simply Ethical, adds: “LCP are providing access to a unique and attractive asset class whilst ensuring the fund remains within the bounds of Sharia statute. As a bricks and mortar product, often preferred by Muslim investors, the fund is a perfect recipe for us. The projected returns are excellent and LCP provide a strong track record.”

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 1

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas energy firms began to prepare for restarting oil and gas fields shuttered by freezing weather.

Brent crude futures were down $1.16, or 1.8%, to $62.77 per barrel, by 1150 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.42, or 2.4%, to $59.10 a barrel.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, according to analysts.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

However, firms in the region on Friday were expected to prepare for production restarts as electric power and water services slowly resume, sources said.

“The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger,” said Vandana Hari, energy analyst at Vanda Insights.

Oil fell despite a surprise fall in U.S. crude stockpiles in the week to Feb. 12, before the freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.

While the thawing relations could raise the prospect of reversing sanctions imposed by the previous U.S. administration, analysts did not expect Iranian oil sanctions to be lifted anytime soon.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” StoneX analyst Kevin Solomon said.

(Additional reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by Jason Neely)

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies 2

By Douglas Busvine and Christoph Steitz

BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers with a stark choice: pay up, stock up or risk getting stuck on the sidelines as chipmakers focus on more lucrative business elsewhere.

Car manufacturers including Volkswagen, Ford and General Motors have cut output as the chip market was swept clean by makers of consumer electronics such as smartphones – the chip industry’s preferred customers because they buy more advanced, higher-margin chips.

The semiconductor shortage – over $800 worth of silicon is packed into a modern electric vehicle – has exposed the disconnect between an auto industry spoilt by decades of just-in-time deliveries and an electronics industry supply chain it can no longer bend to its will.

“The car sector has been used to the fact that the whole supply chain is centred around cars,” said McKinsey partner Ondrej Burkacky. “What has been overlooked is that semiconductor makers actually do have an alternative.”

Automakers are responding to the shortage by lobbying governments to subsidize the construction of more chip-making capacity.

In Germany, Volkswagen has pointed the finger at suppliers, saying it gave them timely warning last April – when much global car production was idled due to the coronavirus pandemic – that it expected demand to recover strongly in the second half of the year.

That complaint by the world’s No.2 volume carmaker cuts little ice with chipmakers, who say the auto industry is both quick to cancel orders in a slump and to demand investment in new production in a recovery.

“Last year we had to furlough staff and bear the cost of carrying idle capacity,” said a source at one European semiconductor maker, who spoke on condition of anonymity.

“If the carmakers are asking us to invest in new capacity, can they please tell us who will pay for that idle capacity in the next downturn?”

LOW-TECH CUSTOMER

The auto industry spends around $40 billion a year on chips – about a tenth of the global market. By comparison, Apple spends more on chips just to make its iPhones, Mirabaud tech analyst Neil Campling reckons.

Moreover, the chips used in cars tend to be basic products such as micro controllers made under contract at older foundries – hardly the leading-edge production technology in which chipmakers would be willing to invest.

“The suppliers are saying: ‘If we continue to produce this stuff there is nowhere else for it to go. Sony isn’t going to use it for a Playstation 5 or Apple for its next iPhone’,” said Asif Anwar at Strategy Analytics.

Chipmakers were surprised by the panicked reaction of the German car industry, which persuaded Economy Minister Peter Altmaier to write a letter in January to his counterpart in Taiwan to ask its semiconductor makers to supply more chips.

No extra supplies were forthcoming, with one German industry source joking that the Americans stood a better chance of getting more chips from Taiwan because they could at least park an aircraft carrier off the coast – referring to the ability of the United States to project power in Asia.

Closer to home, a source at another European chipmaker expressed disbelief at the poor understanding at one carmaker of how it operates.

“We got a call from one auto maker that was desperate for supply. They said: Why don’t you run a night shift to increase production?” this person said.

“What they didn’t understand is that we have been running a night shift since the beginning.”

NO QUICK FIX

While Infineon, the leading supplier of chips to the global auto industry, and Robert Bosch, the top ‘Tier 1’ parts supplier, both plan to commission new chip plants this year, there is little chance of supply shortages easing soon.

Specialist chipmakers like Infineon outsource some production of automotive chips to contract manufacturers led by Taiwan Semiconductor Manufacturing Co Ltd (TSMC), but the Asian foundries are currently prioritising high-end electronics makers as they come up against capacity constraints.

Over the longer term, the relationship between chip makers and the car industry will become closer as electric vehicles are more widely adopted and features such as assisted and autonomous driving develop, requiring more advanced chips.

But, in the short term, there is no quick fix for the lack of chip supply: IHS Markit estimates that the time it takes to deliver a microcontroller has doubled to 26 weeks and shortages will only bottom out in March.

That puts the production of 1 million light vehicles at risk in the first quarter, says IHS Markit. European chip industry executives and analysts agree that supply will not catch up with demand until later in the year.

Chip shortages are having a “snowball effect” as auto makers idle some capacity to prioritize building profitable models, said Anwar at Strategy Analytics, who forecasts a drop in car production in Europe and North America of 5%-10% in 2021.

The head of Franco-Italian chipmaker STMicroelectronics, Jean-Marc Chery, forecasts capacity constraints will affect carmakers until mid-year.

“Up to the end of the second quarter, the industry will have to manage at the lean inventory level,” Chery told a recent Goldman Sachs conference.

(Douglas Busvine from Berlin and Christoph Steitz from Frankfurt; Additional reporting by Mathieu Rosemain and Gilles Gillaume in Paris; Editing by Susan Fenton)

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Aussie and sterling hit multi-year highs on recovery bets

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Aussie and sterling hit multi-year highs on recovery bets 3

By Tommy Wilkes

LONDON (Reuters) – The Australian dollar rose to near a three-year high and the British pound scaled $1.40 for the first time since 2018 on optimism about economic rebounds in the two countries and after the U.S. dollar was knocked by disappointing jobs data.

The U.S. currency had been rising in recent days as a jump in Treasury yields on the back of the so-called reflation trade drew investors. But an unexpected increase in U.S. weekly jobless claims soured the economic outlook and sent the dollar lower overnight.

On Friday it traded down 0.3% against a basket of currencies, with the dollar index at 90.309.

The Aussie rose 0.8% to $0.784, its highest since March 2018. The currency, which is closely linked to commodity prices and the outlook for global growth, has been helped by a recent rally in commodity prices.

The New Zealand dollar also gained, and was not far off a more than two-year high, while the Canadian dollar rose too.

Sterling rose to $1.4009 on Friday, an almost three-year high amid Britain’s aggressive vaccination programme.

Given the size of Britain’s vital services sector, analysts say the faster it can reopen the economy, the better for the currency. Sterling was also helped by better-than-expected purchasing managers index flash survey data for February.

The U.S. dollar has been weighed down by a string of soft labour data, even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

Despite the recent rise in U.S. yields, many analysts think they won’t climb too much higher, limiting the benefit for the dollar.

“Our view remains that the Fed will hold the line and remain very cautious about tapering asset purchases. We think it will keep communicating that tightening is very far off, which should dampen pro-dollar sentiment,” said UBS Global Wealth Management strategist Gaétan Peroux and analyst Tilmann Kolb.

ING analysts said “the rise in rates will be self-regulating, meaning the dollar need not correct too much higher”.

They see the greenback index trading down to the 90.10 to 91.05 range.

U.S. dollar

Aussie and sterling hit multi-year highs on recovery bets 4

The euro rose 0.4% to $1.2134. The single currency showed little reaction to purchasing manager index data, which showed a slowdown in business activity in February. However, factories had their busiest month in three years, buoying sentiment.

The dollar bought 105.39 yen, down 0.3% and a continued retreat from the five-month high of 106.225 reached Wednesday.

(Editing by Hugh Lawson and Pravin Char)

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