Abdulkader Thomas started the ball rolling by asking Angelia Chin-Sharpe for her perspective on the global Islamic equity space and its trend.

She said BNP Paribas’ assets under management were US$500 billion and its Islamic assets under management came in at slightly more than US$500 million. The firm sees tremendous growth in Islamic asset management. She said the Shariah assets for the non-MENA (Middle East and North Africa) market is US$150 billion while Asia has about US$120 billion of Shariah assets. Malaysia, the third largest, has about US$65 billion of Shariah assets.

Responding to Abdulkader’s question on the importance of Malaysia in the Islamic global space, Nik Norishky Thani said it is well known for its cutting edge policies and innovation. The Dubai International Financial Centre (DIFC) considers Malaysia an important model for Islamic finance as well as in debt and equity markets. Islamic counters made up 85% of the total counters listed on Bursa Malaysia.

Nik Norishky added that global linkages are key to this and that DIFC does not confine the raising of capital and listing activities to the domestic market alone. He said the Malaysia International Islamic Financial Centre (MIFC) is a springboard for capital seekers and providers to venture abroad and to raise funds, and not only in the domestic market.

Abdulkader then asked Wan Asmadi Wan Ahmad about the performance of the Islamic market in Malaysia. He put the size of Malaysia’s capital market at RM900 billion (US$254.24 billion), a growth of 140% compared to RM375 billion (US$109.24 billion) in 1998. The number of companies listed on Bursa Malaysia is 988, an increase of 34% from 736 during the last 10 years.
Islamic counters made up 85% of the total counters while Islamic market capitalization made up 64% of the total market capitalization. Islamic unit trusts also grew exponentially with 138 Islamic unit trust funds with a total net asset value (NAV) of RM16 billion to RM18 billion (US$4.52 billion to US$5.08 billion), about 10% of the total NAV, which he estimated at RM160 billion (US$45.16 billion).

In 1995, there were approximately four Islamic unit trust funds.

Md Noor A Rahman said the Shariah stocks have been performing well for the past three years. The Malaysian stock market also witnessed a good performance from the plantation stocks between 2005 and 2007.

Abdulkader then sought the panel’s view on whether the Shariah compliant companies which make up 85% of the total listed companies on Bursa Malaysia and 64% of the market capitalization would create an index problem due to their small size.

Md Noor dismissed size as an issue as a number of Shariah compliant counters, especially plantation stocks such as IOI Corporation and Sime Darby, are among the top 50. If the finance counters are removed from the list, a large portion is plantation stocks which account for about 19%. Wan Asmadi said size is not the issue, but that one must also look at liquidity screening.

Abdulkader then asked the panelists for their views on Shariah screening and whether one can really set aside the stock as being truly different from other traditional counters.

Che Zam Fadzilah Abd Kahar said that in 2007 there were 876 Shariah counters compared to 843 in 2008. He said as far as Al Rajhi is concerned, only a handful of these Shariah counters are compliant. It is a question of perception on what is Shariah compliant, he said.

Wan Asmadi said there are three types of Shariah screening: the Dow Jones, FTSE and the Malaysian regulators. The principal difference is that in Malaysia, the screening is not so much concerned with the financial ratios, the level of borrowings or receivables, or the level of cash, but these elements are part of the screening requirements of Dow Jones or FTSE.

Nik Norishky said the screening criteria of the FTSE and Dow Jones are quite similar, but there is a significant difference between the two and the Malaysian standard. For this market to continue its growth, there is a need for a level playing field and he called for greater collaboration among the three as they have the same Shariah scholars.