MALAYSIA ISLAMIC FINANCE GROWTH: Opportunities abound in emerging markets

By Rizwan Khatik - Wed Jun 01, 7:39 am

Emerging markets fund guru, Mark Mobius, executive chairman, Templeton Emerging Markets Group, put the business and investment case for emerging markets, especially in Southeast Asia, China and India, and predicted that the Islamic finance industry has a growing role to play and is set to continue on its current growth path.

Mobius, who is based in Singapore, recently gave a special lecture on growth and investment prospects in emerging markets (EM) at the Investors Forum on Opportunities in Malaysia which was organized by Bank Negara Malaysia (BNM) in conjunction with the Malaysia International Islamic Financial Centre (MIFC) Initiative at the Chambre de Commerce in Luxembourg during the 8th Summit of the Islamic Financial Services Board (IFSB).

The current Islamic funds net asset value universe globally totals an estimated $52 billion comprising 750 funds. In terms of performance, emerging markets funds in first quarter 2011 have outperformed the world and US funds. This is also true for one year ending Dec. 31, 2010 and over a 5-year period. This performance will continue and Malaysia, he stressed, is part of this scenario.

Templeton has had a presence in Malaysia since 1988 and received an Islamic Fund Management license from the Securities Commission in January 2010. Going forward, Mobius suggested that because of its ethical requirements “Islamic funds do better and Islamic banks do better.” He urged some markets such as Saudi Arabia and others to open up so as to allow direct Shariah-compliant investments; greater standardization regarding structures and documentation; greater articulation of the Islamic investment proposition especially the notion that Islamic finance is for anybody regardless of religion; and creating greater market awareness of the industry.

He added that Luxembourg is a very acceptable fund registration domicile and that the Islamic funds industry was a great opportunity for Luxembourg, as funds domiciled in the Grand Duchy could be distributed throughout the region through the EU passport, and beyond to other markets in the Middle East and Asia. He confirmed that 90 percent of Franklin Templeton funds were domiciled in Luxembourg.