Bursa Malaysia feels that there is a strong need for diverse products that match different investors' appetites, supported by an adequate amount of regulatory oversight championing public interest, in order to create a more appealing Islamic investment landscape. Global Head of Islamic Markets, Raja Teh Maimunah Raja Abdul Aziz shared this sentiment at the World Islamic Funds and Capital Markets Conference in Bahrain on 24 May 2010, where she presented a paper on ‘Tapping into Strong Fundamentals - Revitalising Growth Prospects for Islamic Investment'.
She said that investor behaviour has shifted as a result of the global financial crisis. Citing Capgemini & Merill Lynch's ‘World Wealth Report 2009' on both conventional and Islamic market products, Raja Teh offered that since 12008, approximately 50% of investments have been placed under low margin asset classes compared to 35% in 2006, before the global economic crisis. "High net worth individuals have been seeking safe and tangible investments, and more wealth is allocated to fixed income and cash deposits," she said.
In this respect, product diversification plays an important role in catering to investors who have lower risk appetites in the interest of capital preservation. The existence of products such as Islamic Exchange Traded Funds (ETFs), Leasing Funds and Real Estate Investment Trust (REITs) offer these investors more choices. At the same time, these products also appeal to those who are seeking defensive investments where the returns may be marginal yet stable.
"As investor cautiousness prevails while countries inch towards economic recovery, it is equally as important to continuously work towards enhancing corporate governance and regulatory standards," she said.
"The approach must be holistic. Good corporate governance comes from an all encompassing regulatory system comprising external regulation as well as self-regulation. While the role for the former is clearly aimed at ensuring the integrity of the capital market, the latter requires boards and management to be more committed towards initiatives such as investor protection and putting in place a robust risk management function."
In addition to the usual functions which seek to comply with regulatory requirements, Raja Teh added that companies within the capital markets could consider Shari'ah compliance as an internal control that will result in enhanced corporate governance for companies.
Shari'ah compliance calls for increased transparency and good governance, and is focused upon offering investments that are safe and liquid. It will enhance the value proposition of a company seeking to maintain their relevance and attractiveness on investors' radars - especially the cautious ones, she said.
In her presentation, Raja Teh also mentioned that Malaysia's strong fundamentals had given it an edge in leading the world in Islamic finance. "Bursa Malaysia remains committed in furthering the Malaysian International Islamic Financial Centre (MIFC)'s agenda of making the country a global hub for Islamic finance.
The above was based on a presentation by Ms. Raja Teh Maimumah Raja Abdul Aziz, Global Head of Islamic Markets, Bursa Malaysia Berhad at the World Islamic Funds and Capital Markets Conference in Bahrain, on 24 May 2010, where she presented a paper on ‘Tapping into Strong Fundamentals - Revitalising Growth Prospects for Islamic Investment'.
Note:
1 Figures are based on Capgemini & Merill Lynch's ‘World Wealth Report
2009'