PETALING JAYA: There remains ample room and potential for more syariah-compliant financial companies to list on the Malaysian stock exchange, according to Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar.
In his keynote address during the Shariah Investing Virtual Conference 2020 yesterday, Abdul Wahid said there are currently only three syariah-compliant financial stocks listed on Bursa Malaysia out of the overall 34 listed financial companies.
“It is hardly 9% of the 34 listed financial stocks, ” said Wahid.
Across the Bursa equity universe, a total of 732 of the 932 listed stocks or 79% are syariah-compliant as of May this year. The market capitalisation of syariah-compliant stocks make up about 70% of the overall market capitalisation of RM1.6 trillion.
The average daily trading value (ADTV) of syariah-compliant securities made up 70% of the ADTV of RM2.8bil.
Commenting on the prospects of the Islamic capital market, Wahid said the potential remains promising domestically and globally.
He pointed out that under the second Capital Market Masterplan, the Islamic financial sector in Malaysia is forecast to grow at a double-digit rate and hit a size of nearly RM3 trillion in 2020.
“Continued promotion by the asset management industry can help contribute to a greater awareness of syariah investing to a broader group of investors.
“There are opportunities for further product innovation and development to provide a more extensive array of syariah-based products for the industry, ” he said.
As of March 2020, syariah funds made up 23% or RM170bil of total industry assets under management. Meanwhile, syariah unit trust funds’ net asset value (NAV) were valued at RM99bil or 23% of the total industry NAV.
Wahid also said the syariah indices on Bursa have consistently outperformed their conventional counterparts over the last 10 years.“The FBM Hijrah Shariah Index, comprising the 30 largest syariah-compliant companies on the FBM EMAS Index, has consistently outperformed the FBM KLCI, growing about 32% between 2010 and May 2020.
“These facts serve to suggest that syariah-compliant investments are an attractive source of value for investors, ” said Wahid.
Meanwhile, CGS-CIMB Research head of research Ivy Ng, who spoke in a separate session, said syariah-compliant investments are expected to outperform conventional investments in 2020.
This was primarily because of the strong performance of the listed glove stocks and the fact that the sectors that are typically syariah-compliant are rather defensive.
In comparison, within the conventional investments, sectors such as banking tend to be more cyclical, according to Ng.
CGS-CIMB Research was overweight on the rubber gloves, oil and gas and healthcare sectors for the rest of the year.
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