Capital markets important for emerging economies


KUALA LUMPUR: With international reserves in Asia reaching US$3tril this month, capital markets have become increasingly important intermediation channels for emerging economies in the continent, said Kuwait Finance House (KFH).  

Chief economist Baljeet Kaur Grewal said capital markets directed funds to productive economic sectors for emerging countries, and the continuous development of intermediate channels had led to the rising significance of equities, bonds and structured financial products. 

Speaking at the Global Islamic Finance Forum yesterday, Baljeet said the Islamic capital market would undoubtedly be expanding quickly as well, and syariah-compliant products were estimated to exceed US$250bil, growing at 23.5% annually over the past five years. 

“The potential is huge. By 2020, there will be 2.5 billion Muslims worldwide compared with 1.5 billion now. We expect Islamic banks to manage up to 50% of Muslim savings in 10 years, so Islamic financial services is estimated to be at US$4tril then,” she said. 

Baljeet also said the bond market would continue to be a key way for raising funds, with total government and corporate bonds standing at RM377.2bil at end-2006, with 380 issues of rated and issued Islamic bonds (sukuk) worth RM165.2bil as at December last year. 

“This year, we believe sukuks will continue to dominate the primary Islamic debt market at 70%, underpinned by Ninth Malaysia Plan projects financing,” she said. 

Baljeet forecast global sukuk issuance to touch US$35bil from US$26.8bil last year. In 2006, sukuk issuances represented 55% of all bonds issued in Malaysia. 

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