Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
It arrives on the scene as MalaysiaÆs government looks to dramatically develop a liquid ETF market by yearÆs end to enable pension funds and other government-linked investment companies to sell down shares in listed companies.
The countryÆs first equity ETF will give investors exposure to the top 30 listed companies on Bursa Malaysia, as measured by market capitalisation, which are all sharia-compliant. It will also use the performance of FTSE Bursa Malaysia Large 30 Index as its benchmark, and as with ordinary shares, investors will have instant access to pricing and trading through an online portal.
AmInvestment BankÆs FBM30etf has an approved fund size of 500 million units and as of 25 May, 2007, the price of the open-ended fund was trading at RM8.70 per unit. It is the second time that AMInvestment Bank has been involved a Malaysian ETF milestone. In July 2005, the Malaysian financial group launched the Asian Bond Fund (ABF) Malaysia Bond Index Fund, which remains the sole ETF listed in Malaysia.
The approved launch of the FBM30etf comes on the back of a major initiative by the Malaysian government to create a liquid ETF market by the end of 2007. Under its capital market masterplan, first devised in 2001, Malaysia is calling on industry participants to develop ETFs to boost retail participant in the countryÆs equity markets.
By the end of the year, the government is looking to set up RM3.5 billion (over $1 billion) worth of ETFs. Aside from promoting greater liquidity and market participation on Bursa Malaysia, the Malaysian government also hopes that ETFs will help it reduce its own holdings in government-linked companies. As an incentive, the government-linked investment companies (GLICs) expected to participate in these ETFs will be allowed to sell a portion of their portfolios in exchange for units in the ETFs.
The government has also made preliminary plans to promote Islamic ETFs, which will likely require involvement of the private sector. The proposed Islamic ETFs are still in the preparation stage currently and those in the industry believe it is unlikely to see one of these funds listed on Bursa Malaysia until 2008.
ETFs have become a very hot investment product in Southeast Asia in the past few years. Outside of Malaysia, 2007 has also been marked by the introduction of ETFs in Thailand. In February of this year, local asset manager One Asset was selected by the Securities and Exchange Commission (SEC) of Thailand to run the nationÆs first ETF.
On top of this, MalaysiaÆs CIMB launched the worldÆs first Asean ETF in 2006, listed on the Singapore Exchange (SGX) and comprising of the 40 top stocks by market capitalisation and adjusted for free-float across Indonesia, Malaysia, Philippines, Singapore and Thailand.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains