Malaysian Securities Exchange is working towards maximising the potential of Malaysia's Islamic capital market, which is growing rapidly and attracting strong interest internationally, especially from other Islamic countries, said the head of exchanges Dr Zaha Rina Zahari.
She said MSEB was considering introducing several new syariah-compliant products, including exchange-traded funds (ETFs) and derivatives-based ETF futures, this year to further “whet the appetite” of both local and foreign investors for such products.
ETFs are securities that combine the essential elements of individual stocks and index funds. And like shares, they could be traded on stock exchanges, giving investors the opportunity to buy or sell an interest in an entire portfolio in a single transaction, Zaha said.
She told StarBiz in a telephone interview that last year alone syariah-compliant stocks accounted for 81% of all shares listed on MSEB, while Islamic bonds accounted for 38% of corporate bonds outstanding in Malaysia.
She said MSEB's market capitalisation had grown at an annual average rate of 13% since 2000. In fact, the exchange's outlook for this year had been boosted by the bullish and positive ratings of international fund management companies such as Credit Suisse First Boston and Standard & Poor's, Zaha added.
Last Friday, Bank Negara governor Tan Sri Dr Zeti Akthar Aziz said at the second general assembly of the Islamic Financial Services Board (IFSB) and fourth meeting of its council in Bali that collective effort from all the relevant entities in the financial sector was needed to maximise the potential of the Islamic capital market.
She identified three key areas that needed greater attention: acceleration in the pace of financial innovation, strengthening risk management capabilities, and leveraging on information technology.
Zaha said the local capital market could be one of the best “homes” for the US$1.3 trillion of funds, mostly believed to be of Middle East origin, which had been “flying out” of the Western capital markets of New York, London, Frankfurt and Paris after the Iraq war and the Sept 11, 2001, terrorist attacks on the United States.
She said Malaysia, which had steadily developed an Islamic financial system and capital market, had the potential to be one the most suitable destinations for these migrating funds.
Zaha added that the Labuan International Financial Exchange (LFX), a subsidiary of MSEB, could also be used as the vehicle for investors and issuers to park their funds on the exchange.
Fourteen global international Islamic securities are already listed on the LFX. Of these, four are syariah-compliant, with the latest being the secondary listing of the US$700mil Qatar Global Sukuk issued by the Qatar Government.
The syariah-compliant instruments, valued at US$1.45bil, currently account for half the LFX's total market capitalisation, according to Zaha