The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
What has the Securities Commission done to come closer to achieving MalaysiaÆs goal of becoming a global hub for Islamic investments?
Mahmood: The Securities Commission is statutorily mandated not only to regulate but also to develop the Malaysian capital market. In meeting our obligations, the development of Islamic capital market to be an international Islamic capital market centre is an objective in our Capital Market Masterplan; a goal reinforced in the Malaysia International Finance Centre initiatives announced in 2006.
Over the years, Malaysia has built a sharia market that is probably the most comprehensive and transparent Islamic capital market in the world. In Malaysia, investors can select from a broad range of products to suit their requirements, have access to end-to-end sharia-compliant services and take reassurance from the consistency and clarity in relation from the application of sharia standards. This is in addition to meeting the conventional regulatory standards.
Malaysia has also been at the forefront in product and service innovation with a strong track record in commercializing both domestic and international products. This means that we have achieved critical mass in terms of the capabilities to be a centre for international origination and distribution of Islamic products.
What does Malaysia offer Islamic investors at the moment?
Malaysia is ahead of the curve in the Islamic capital market. As a result of its efforts, Malaysia today has an equity market where 853 or 86% of total listed securities are sharia-compliant securities. We are the worldÆs biggest issuer of sukuks (Islamic bonds), we have two listed real estate investment trusts (Reits) and 134 Islamic unit trust funds.
As evident from the governmentÆs Budget 2008 and other initiatives, we are creating a fully liberalized environment to attract international players to Malaysia's Islamic capital market, which offers a strong value proposition for international players to establish their centre for Islamic debt origination, corporate finance and wealth management operations in Malaysia.
What has the Securities Commission done to monitor and ensure compliance with sharia requirements?
The Securities Commission has a keen interest in ensuring that the Islamic capital market occurs within a regulatory framework that protects the interest of Muslim and other investors and has issued various guidelines in relation to sharia compliance practices for various intermediation activities and products.
We established the first Shariah Advisory Council which has evolved to become an important catalyst for the development of Islamic products and services in Malaysia. The council is made up of sharia experts including scholars, academics, market practitioners and sharia judges who meet regularly to consider sharia issues and provide certainty and clarity to the market on the sharia-compliant nature of a particular product. For instance, the council was instrumental in formalizing an approach for the screening of sharia-compliant equities and has been proactive in advancing product innovation.
With growing interest in Islamic finance among regulators around the world, the Securities Commission has been recognized as being a leading advocate of Islamic capital market development. In 2004, the Securities Commission led the task force of the International Organisation of Securities Commissions on Islamic capital markets in examining the developments and regulatory issues related to the global Islamic capital market.
What are some of your latest initiatives?
Currently, we are seeking to strengthen MalaysiaÆs links with other global markets and have signed a mutual recognition agreement with the Dubai Financial Services Authority. It is the first such agreement between two Islamic markets for the cross-border distribution and marketing of Islamic Funds and we would be looking for the opportunity to promote greater cross-border linkages.
Malaysia has also been promoting the growth of cross-border flows. In 2006, Malaysia listed the worldÆs first exchangeable sukuk, the Khazanah Exchangeable sukuk, in other markets to help promote growth of other Islamic markets.
Malaysia is also expanding its range of financial intermediaries and products. Among the Islamic product segments that offer high growth possibilities include exchange traded funds, structured products and the whole spectrum of Islamic wealth management industry û spanning asset management, unit trusts, financial planning, venture capital and private equity.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
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