THE Securities Commission’s (SC) advocacy for regionalisation of Asean’s 10 capital markets is rather timely as keynoted at the recent Asean Fixed Income Conference 2017. In 2013, according to SC, Asean’s total capital markets stood at US$3 trillion (RM13 trillion) and the saving rate was around US$800 billion in 2015.
As an add-on, capital market players may look towards the Islamic Capital Market (ICM) as a new Blue Ocean Wave for Asean capital markets. ICM plays a supporting role to the Islamic Banking and Financial (IBF) system in the enhancement of Islamic financial markets in Malaysia.
The advantages of ICM were emphasised in the “Islamic Capital Market Task Force of the International Organisation of Securities Commissions” report, which confirmed the role of ICM in the diversification of conventional capital market dimension at global platforms. ICM is anticipated to strengthen Asean in propelling collective regional financing, especially in the Asean Economic Community (AEC). Developing new ICM initiatives will therefore buffer Asean from Brexit, the United States’ protectionism and the European Union’s economic volatilities.
In realising this initiative, there is a need to relook Islamic Banking Education and IBF as the twin towers of ICM growth. ICM has all the ingredients to create innovation in the AEC capital market, catering to real economic progress and regional trade integration. ICM, through innovative products, will not only supplement conventional capital market but will also provide a unique source of capital in AEC’s economic development agenda in terms of liquidity, scale and capacity. This will generate capital market diversification and maintain stability in terms of global shocks.
In Malaysia, ICM has seen enormous expansion in the Islamic equity sector and fixed income. According to a report, at the end of 2014, the total value of ICM was about RM1.5 trillion, accounting for 57 per cent of the total market capitalisation in Malaysia and represented a 10-year compound annual growth rate of 11.3 per cent. On Bursa Malaysia, more than 70 per cent of the stocks are classified as syariah-compliant by the Syariah Advisory Council of SC, and there are about 200 unit trust funds across asset classes.
Notable innovative products of global sophistication are Malaysia’s first Islamic real estate investment trust (i-REIT), first Islamic stapled REIT, Asia’s first Islamic exchange-traded fund (i-ETF) and Asia’s first exchange-traded sukuk. Perhaps it is time for a wider diffusion and adoption of ICM by setting up an AEC Islamic Capital Market as a new capital space for AEC. JEONG CHUN PHUOC Shah Alam, Selangor
Read More : http://www.nst.com.my/news/2017/02/213362/islamic-capital-market-unique-source-capital
With Islamic assets under management of some Rm132.4 billion (US$29.66 billion), Malaysia is well on its way towards establishing itself as the international centre of Islamic wealth management services, notwithstanding the ongoing 1MDB scandal.
The country’s aim of cementing its position as the Islamic wealth management capital of the world received a boost recently with the launch of a five-year Islamic Fund and Wealth Management Blueprint.
Unveiled by second finance minister Johari Abdul Ghani, the 51-page document focuses on three areas towards solidifying Malaysia as the centre of Islamic wealth management services globally. Specifically it will:
strengthen Malaysia’s position as a global hub for Islamic funds
establish the country as a regional centre for shariah-compliant sustainable and responsible investment
develop it as an international provider of Islamic wealth management services.
Mr Ghani said that the recommendations are made to “provide flexibility within the overall target of the blueprint” to enable suitable adjustments, adding that “a tremendous amount of work is, however, required to ensure that the Blueprint strategies are appropriately put into place”.
Addressing the Securities Commission Malaysia (SC) International Fund Forum 2017, Mr Ghani said that with its comprehensive Islamic finance ecosystem and track record in innovation, Malaysia was in an “advantageous position to play a lead role in shaping the concept and driving the development of Islamic wealth management services”.
The blueprint will be implemented over a period of five years and is drawn up with the aim of developing and growing Malaysia’s Islamic capital market.
The first phase will focus on the formulation of a framework for issuance of SRI investment funds, the setting up of the global capacity building centre for Islamic Capital Market (ICM), and the establishment of digital investment services framework.
Asean’s Burgeoning Muslim Middle-Class
Malaysia’s interest in the rapidly growing Muslim middle-class, particularly in Asean where Muslims represent 42 per cent of the Asean Community’s (ACs) population is not without reason.
Speaking at the 12th World Islamic Economic Forum (WIEF) in Jakarta last year, Malaysia Prime Minister Najib Razak said that in 2014-2015 the Islamic economy grew at almost double the global GDP growth rate, while Muslim consumer spending is forecast to reach $2.6 trillion by 2020 (See: Cambodia Aims For Share of Halal Market).
The Islamic market in Malaysia is estimated to have been worth some $1.9 billion in 2013, with officials forecasting it to contribute about 5.8 per cent to Malaysia GDP by 2020.
Malaysia is not the only nation hoping to capture a larger slice of the burgeoning Muslim middle-class. While Malaysia seeks to be the centre of Islamic wealth management services, Cambodia hopes that the introduction of a formal halal certification process for restaurants and food producers will attract more Muslim tourists to the Kingdom and also strengthen the growth of the Kingdom’s nascent halal certified food sector.
Meanwhile, in Indonesia where the Islamic market is valued at more than $10 billion annually and growing at between 7-10 per cent, the Islamic Development Bank (IDB) announced that to date it had approved $4.2 billion to support development projects.
The Bank said money had been dispersed in the areas of education, health, transportation, communication, industries, mining, power generation, agriculture, water supplies, and Islamic banking, as well as financing numerous foreign trade operations between Indonesia and other IDB member countries.