24-06-2008: Zarinah: Expand Islamic securities market value chain





KUALA LUMPUR: The lack of development beyond establishing systems to determine Syariah-compliance has created a chronic need to focus on expanding the entire value chain of the Islamic securities market.

Securities Commission (SC) chairman Datuk Zarinah Anwar said compliance required only meeting minimum standards, but adopting a distinctive Islamic approach to creating shareholder wealth could generate valuation premiums for Islamic equities.

Speaking at the Islamic Finance Asia Summit 2008 here yesterday, she said: “We can observe that while there are many Syariah-compliant stocks, we would be hard-pressed to identify a truly leading global Islamic company, branded and marketed as such.”

She added that although systems to determine Syariah-compliance had spawned the development of Islamic equity funds and enabled investors seeking Syariah-compliant investments to access the equity market, greater exploration was required to leverage on these equities to effectively tap the brand value of Islamic equities.

Zarinah also posed questions pertaining to the development of the Islamic equities market, including whether or not specific aspects of governance, transparency, corporate responsibility or ethical conduct could be ascribed to Islamic companies.

As such, the country would also need to overcome the shortage of qualified Syariah and Islamic finance experts, as well as greater scholarly and applied research in Islamic finance.

“Developing a common framework for governing, supervising and regulating Islamic capital markets is indeed a major challenge for all of us (and) it cannot be unilaterally pursued by any one regulator,” Zarinah said.

She said to achieve this end, the International Organisation of Securities Commissions (IOSCO) had established a task force to assess the compatibility of Islamic capital market products with principles of securities regulation.

“This, in fact, is the second Islamic capital market-related initiative by IOSCO over the last four years — a clear reflection of the world body’s recognition of the increasing significance of Islamic finance in the global financial markets,” she said.

Zarinah added that the SC’s strategy to internationalise the country’s Islamic capital market was also directed to building its connectivity with other Islamic markets in the global centres, the Middle East and North Africa (MENA) region as well as the Far East.

She said: “The potential for recycling capital flows that arise from excess savings among members of the Organisation of Islamic Countries to those members with deficits allows us the opportunity to promote the growth of our capital markets as well as to improve the welfare of our communities.”

Hence, she said, there was potential to explore many possible win-win strategies that could generate more profits and economic development simultaneously.

Zarinah also said a thriving global Islamic market needed many active players that had foresight and courage to venture beyond traditional comfort zones, apart from regulators that could provide the environment to promote international linkages and promoting cross border activities.

“Just as we welcome foreign intermediaries to our shores, we are also keen to see more Malaysian intermediaries going abroad and working closely with international or domestic intermediaries in various markets to seek collaboration opportunities to create more growth momentum and business opportunities,” she said.

Zarinah added that some of the initiatives that could be pursued included dual-listing of products and companies, creation of regional and global Islamic funds and venture capital and private equity funds.


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