Abdulkader Thomas asked the panelists the benefits of linking the exchanges in the emerging Islamic markets. Paul Hoff saw it as a positive move as this will make it easier to cross-list and reduce the cost for the issuers and allow investors in a number of different markets to participate.
Devanesan Evanson said linking the exchanges will help increase liquidity but it cannot only be achieved by linkages as sentiment is equally important.

Abdulkader then asked Rushdi Siddiqui whether there should be a unique Islamic exchange. According to Rushdi, an Islamic stock exchange is unlikely to materialize soon as this means having an Islamic capital market.

Another factor is the location for the stock exchange. Rushdi said 99% of the companies that are deemed Shariah compliant are from the Organization for Economic Cooperation and Development (OECD) member countries and not from Muslim nations. Most of the companies that are listed on a stock exchange in a Muslim country are from the finance sector and they usually make up 50% to 60% of the index, so these counters are removed.

To Abdulkader’s question on how to develop an equity investing culture, Devanesan said if the market is orderly and fair, this can be cultivated. As for Bursa Malaysia, it has to strike a balance between commercial and regulatory objectives.

According to Hatem Shafie, prudence is the name of the game and there must be a different level of prudence so that it can accommodate different people, whether they are Islamic or non-Islamic.
Abdulkader then asked the panel for their views on which Shariah approach is better: Dubai’s, which allows various Shariah panels, the Gulf’s with Dow Jones or FTSE style screening, or the Malaysian approach, which is based on Securities Commission Malaysia.

Rushdi said when the Malaysian exchange-traded fund (ETF) was launched, the issue on Gulf versus Malaysian standards was addressed as the ETF was for global investors. He said there were aspects peculiar to the screening process in Malaysia as, for example, companies with even one-tenth or 1% of sales coming from alcohol would not be in the index.

Hoff said that FTSE, together with Bursa Malaysia, has created some indices such as the EMAS Shariah Index which focuses on domestic users. Another is the FTSE Bursa Malaysia Hijrah Shariah Index, which adopts stricter screening. Devanesan said it is better to look at providing two alternatives to the market rather than addressing which is better or superior.

Abdulkader then asked Devanesan why he thought the Malaysian stock market is not as vibrant as others such as Hong Kong, and what can be improved. Devanesan’s view was that ensuring the infrastructure is up to mark will make the stock market more vibrant. Certain aspects, he said, are within its control and there are some aspects that are not. Another important aspect is perception as this shifts reality.

As for the Egyptian Stock Exchange, Hatem said the domestic market was huge and the people with resources to invest have their own criteria for investing.

Abdulkader then asked Devanesan how to attract foreign companies to list their shares on Bursa Malaysia and make it a truly international space. According to Devanesan, apart from raising funds, the market must be able to provide value to the companies that are listed. Good corporate governance is also important to ensure people raise money in a market.

A company needs a good valuation in order to go for listing, said Hoff. It needs to understand that listing is an indication of long-term capital health and the ability to raise more money in the future is just as important as securing that good valuation at the initial public offering.

He said there are companies that went for a listing and then later encountered problems. Hence, listing does not help some companies structure their capital requirement, and home is still the best market for them from a long-term perspective.

Evanson ended the session by saying that Bursa Malaysia is looking to new products, which are commodity Murabahah and Islamic securities borrowing and lending.