THE Securities Commission’s (SC) advocacy for regionalisation of Asean’s 10 capital markets is rather timely as keynoted at the recent Asean Fixed Income Conference 2017.
In 2013, according to SC, Asean’s total capital markets stood at US$3 trillion (RM13 trillion) and the saving rate was around US$800 billion in 2015.
As an add-on, capital market players may look towards the Islamic Capital Market (ICM) as a new Blue Ocean Wave for Asean capital markets. ICM plays a supporting role to the Islamic Banking and Financial (IBF) system in the enhancement of Islamic financial markets in Malaysia.
The advantages of ICM were emphasised in the “Islamic Capital Market Task Force of the International Organisation of Securities Commissions” report, which confirmed the role of ICM in the diversification of conventional capital market dimension at global platforms.
ICM is anticipated to strengthen Asean in propelling collective regional financing, especially in the Asean Economic Community (AEC). Developing new ICM initiatives will therefore buffer Asean from Brexit, the United States’ protectionism and the European Union’s economic volatilities.
In realising this initiative, there is a need to relook Islamic Banking Education and IBF as the twin towers of ICM growth. ICM has all the ingredients to create innovation in the AEC capital market, catering to real economic progress and regional trade integration.
ICM, through innovative products, will not only supplement conventional capital market but will also provide a unique source of capital in AEC’s economic development agenda in terms of liquidity, scale and capacity. This will generate capital market diversification and maintain stability in terms of global shocks.
In Malaysia, ICM has seen enormous expansion in the Islamic equity sector and fixed income. According to a report, at the end of 2014, the total value of ICM was about RM1.5 trillion, accounting for 57 per cent of the total market capitalisation in Malaysia and represented a 10-year compound annual growth rate of 11.3 per cent.
On Bursa Malaysia, more than 70 per cent of the stocks are classified as syariah-compliant by the Syariah Advisory Council of SC, and there are about 200 unit trust funds across asset classes. Notable innovative products of global sophistication are Malaysia’s first Islamic real estate investment trust (i-REIT), first Islamic stapled REIT, Asia’s first Islamic exchange-traded fund (i-ETF) and Asia’s first exchange-traded sukuk.
Perhaps it is time for a wider diffusion and adoption of ICM by setting up an AEC Islamic Capital Market as a new capital space for AEC.
JEONG CHUN PHUOC
Shah Alam, Selangor