Investment gif
The internationalisation of Islamic finance in recent years has seen a variety of coun- tries take an unprecedented interest in the industry. Many of these countries are tra- ditional financial centres, such as the UK, Luxembourg and Malaysia. However, in the past few years, countries that may be clas- sified as emerging economic powers have also started looking into establishing Is- lamic finance industries. From South Korea to Ireland, Canada to Australia, South Africa to Kuwait, such countries are beginning to see financial ideas, products and structures based on sharia’a principles.
This of course means that these jurisdic- tions are also increasingly opening up to the Islamic investor. What opportunities are there in these emerging markets? As well as emerging countries, there are also new Islamic finance centres that are already ri- valling London and Kuala Lumpur. Whilst already established in the conventional world of finance, jurisdictions such as Bru- nei, Hong Kong and Singapore are only now becoming known as the potential Islamic finance hubs they are. What is the Islamic investment industry like in these hubs? Is there a variety of opportunities to rival those in traditional Islamic finance centres? What is the outlook overall for Islamic investment in both emerging markets and new Islamic finance centres?
In the post-crisis world, investors are in- creasingly looking towards more Socially Re- sponsible opportunities. It is therefore not just Muslim investors, but also non-Muslims, who are expressing an interest in investment into Islamic asset classes. This is undoubt- edly helping the Islamic investment industry extend its market share as people look for an alternative to the conventional finance system tainted by the global economic crisis. New business opportunities in new markets spell an exciting time for Islamic investment. How can you, as a sharia’a sensitive inves- tor, get involved?
The Amana Develop- ing World Fund the
chief objective of the fund is long-term capital growth through a strategy of in- vesting a minimum of 80% of assets in common stocks of companies with a 50% or more exposure to countries with developing economies and/or markets
,, Islamic investment opportunities in
emerging markets The Amana Developing World Fund (AMDWX) is a fund set up directly to provide Islamic in- vestors with opportunities in emerging mar- kets (Close-Up Media, 2009). Like the first two funds in the Amana Fund family, it de- signed specifically for American Muslim in- vestors. Diversifying its investments across countries within the developing world, the fund predominantly follows a value invest- ment style. The chief objective of the fund is long-term capital growth through a strategy of investing a minimum of 80% of assets in common stocks of companies with a 50% or more exposure to countries with developing economies and/or markets. Put simply, the
fund invests investors’ money in to compa- nies that have the majority of their assets and revenues in emerging market compa- nies. These companies however, may be based in both developing and established economic markets. Nicholas Kaiser, chair- man of Saturna Capital (the fund’s advis- er) and portfolio manager of the new fund claims, “This broader approach may help re- duce the fund’s foreign investing risk”. How does the fund determine if a country is a de- veloping economy? According to the Amana Funds prospectus, it does so by considering factors such as:
• The country’s per capital gross domes- tic product • The percentage of the country’s econo- my that is industrialised • Market capitalisation as a percentage of gross domestic product • The overall regulatory environment • Limits on foreign ownership • Restrictions on repatriation of initial capital or income
A similar fund is CIMB-Principal’s CIMB Is- lamic Global Emerging Markets Equity Fund (Eu, 2008). Launched in 2008, it offers in- vestment exposure to companies in emerg- ing economies within Eastern Europe, Africa, Latin America and Asia. Companies that form the fund’s portfolio include South Korea’s Samsung, Taiwan Semiconductor Manufac- turing, Brazil’s Petrobas and America Movil, the Mexican telecommunications company. Speaking at the launch in Kuala Lumpur CIMB-Principal Chief Executive explains why the Islamic investor should look into emerg- ing market opportunities: “With the global economic uncertainties, the emerging mar- kets’ economies are still in a better posi- tion, showing strong gross domestic product (GDP) growth. The emerging markets are set to rank among the world’s largest econo- mies in the coming decades”.
This view has been echoed numerous times in the past two years by various financial analysts and economic experts. It appears that High Net-Worth Individuals (HWNI) be- lieve the argument as they are increasingly investing in emerging markets, and in Asia- Pacific in particular (World Wealth Report 2010). The pattern of these investments explicitly shows that they are being deliber- ately allocated to the regions and markets expected to have the most growth in the coming years.
A third example of an Islamic emerging market fund is the SEI Islamic Emerging Market Equity Fund, which was launched in 2007 and is domiciled in Ireland. As shown in Figure 1, this fund invests heavily in glo- bal emerging market equities (Trustnet Off- shore, 2010). The fund is a sub-fund of The
2010 October Global Islamic Finance 51
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