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Saturday, 21 June 2008

Malaysia: Need for better Islamic capital market (ICM) infrastructure

KUALA LUMPUR: Although Malaysia has successfully prepared to position itself as a global Islamic capital market (ICM) hub, it needs to improve its ICM infrastructure and offer more innovative Islamic financial products.

BNP Paribas Asset Management Sdn Bhd executive director Angelia Chin said local regulators must put in place a comprehensive infrastructure and regulatory framework for foreign players that were keen to expand and broaden their involvement in ICM.

“We want to see Malaysia easing its rules, allowing banks to conduct Islamic banking business in foreign currencies while continuing to develop and refine innovative Islamic financial products,” she told a media roundtable held in conjunction with the Malaysia ICM Conference 2008 yesterday.

The conference was jointly organised by Bursa Malaysia and the Malaysia International Financial Centre.

Hong Kong-based BNP Paribas Asset Management Asia Ltd structured funds manager Erkan Yilmaz said there was a need to develop specialised Islamic products to cater to both retail and institutional investors.

To date, the ICM products available include debt and equity instruments, global Islamic bonds or “sukuk”, Islamic real estate investment trusts (REITs), Islamic private equity funds and Islamic exchange traded funds (ETFs).

(An ETF is a unit trust fund that is listed and traded on a stock exchange and designed to track the performance of an index.)

Yilmaz said the launch of ETFs by Malaysia was a good move as it enabled fund managers to easily invest in core strategic investments.

CIMB Islamic Bank Bhd executive director and chief executive officer Badlisyah Abdul Ghani, meanwhile, described sukuk as the ambassador for all the Islamic financial products.

Malaysia has grown to be the world’s largest Islamic bond market, accounting for about 60% of global Islamic bonds outstanding, which are worth about US$100bil.

Badlisyah said Islamic REITs and ETFs were also gaining popularity among local and overseas investors keen to diversify their investments in ringgit-based instruments.

To date, syariah-compliant stocks account for about 86% of stocks listed on Bursa and 65% of total market capitalisation.

Aishaya Group head of share division Abdulkader S. Thomas said: “We are seeing an increasing uptake of Malaysian Islamic products outside the region.”

He said there was an interesting phenomenon lately whereby hedge fund managers were seen growing their investment in Islamic products.

Thomas also said there was a need to train and educate new talents to become experts in ICM.

Badlisyah added that Malaysia had a large pool of talent that could be groomed for ICM.

“We need to train bankers to become syariah experts, and syariah experts to be good bankers,” he added.

(The Star, Malaysia)

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