Investment gif
• Market • Political • Currency • Liquidity • Default
The Manager continues, “A possible loss of the principal amount invested cannot be ruled out”. As above-mentioned with emerg- ing markets funds, willingness to accept risk of loss should not be out of the ordinary for sharia’a sensitive investors who are familiar with the profit-loss sharing principles of Is- lamic finance. The first listing of a sharia’a- compliant exchange traded fund (ETF) in Singapore happened on 27th May 2008 (Khan and Bashar). The Daiwa FTSE Sha- riah Japan 100 ETF, Daiwa Asset Manage- ment Ltd’s first ETF, offers an investment channel into companies based in Japan, which itself is trying to emerge as an Is- lamic finance centre.
Hong Kong has been expressing an inter- est in Islamic investment since at least 2007. At that year’s Annual Conference of the Hong Kong Investment Funds Associa- tion, the government’s financial secretary John Tsang stated that “now is the time” for Hong Kong to tap into the potential of Islamic investment (Ewing, 2007). He high- lighted the ideal positioning of Hong Kong in terms of attracting Islamic investment.
“As [China’s] financial centre, we are in a unique position to attract investors in the Middle East and elsewhere. Many inves- tors in the Middle East are already eyeing opportunities in the Chinese market. In this connection, Hong Kong is best placed to be the most effective intermediary for struc- turing and marketing Islamic investment in products to meet the needs of mainland enterprises and Middle Eastern investors”. It was also in this year that the Hong Kong Securities and Futures Commission author- ised the first Islamic funds for sale to retail investors in the territory (
lowtax.net). The Commission’s Intermediaries & Investment Products Executive Director, Alexa Lam con- firms that developing an Islamic investment market is a top priority. “The introduction of
Additional Reading
• The Brunei Times, ‘Asian Finance Bank eyes Islamic fundraising in Brunei’. Available at
http://www.asiaone.com/Business/News/Story/A1Story20091204-183972.html • Capgemini and Merrill Lynch Wealth Management. ‘World Wealth Report 2010’. • Close Up Media. 2009. ‘Saturna Launches the Islamic Amana Developing World Fund’. Available at
http://findarticles.com/p/articles/mi_hb5558/is_20091016/ai_ n39987948/?tag=content;col1 • Eu, Goh Thean. 2008. ‘CIMB-Principal: New Fund to Tap Emerging Markets’. Available at
http://findarticles.com/p/articles/mi_8016/is_20080705/ai_ n44406821/?tag=content;col1 • Ewing, Kent. 2007. ‘Hong Kong and the hookah of Islamic investment’. China Business. • Ford, Mark. 2006. ‘Managing Risk’. Emerging Markets. • Khan, Habibullah and Bashar, Omar KMR. 2008. ‘Islamic Finance: Growth and Prospects in Singapore’. U21Global Working Paper Series, No. 001/2008. •
Lowtax.net. Page on Hong Kong Investment Fund Management. Available at
http://www.lowtax.net/lowtax/html/hongkong/jhkinv.html • Oxford Business Group. 2010. ‘Brunei Darussalam: Faith in Islamic Finance’. Available at
http://www.oxfordbusinessgroup.com/weekly01.asp?id=4761 • Too, Debbie and Begawan, Bandar Seri. 2010. ‘UOB bullish on Brunei Islamic finance market prospects’. The Brunei Times. • Trustnet offshore entry for SEI Islamic Emerging Market Equity. Available at
http://www.trustnetoffshore.com/Factsheets/Factsheet.aspx?fundCode=Z5F64&univ=DC • Zuberi, Haris. 2008. ‘Hong Kong visits Dubai to promote Islamic Finance opportunities in China’. The Islamic Finance Blog-News and Information.
2010 October Global Islamic Finance 53
Islamic retail funds gives added variety to our retail fund market and underscores the versatility of our asset management indus- try”. The funds in question are in the Hang Seng Islamic Investment Series. Accord- ing to the Hang Seng Bank, a leading Hong Kong financial institution, each fund invests in investments compliant with sharia’a. The funds themselves have been certified as sharia’a-compliant by the institution’s Sha- riah Committee. The common investment objective of each of these funds is to oper- ate as a non-capital guaranteed fund, with no income distribution in the form of cash.
Limits on foreign
ownership Market
capitalisation as a percentage of gross domestic product
The country’s per capital
gross domestic product
How does the fund determine if a country is a developing economy?
The percentage of the country’s economy that is industrialised
Restrictions on
repatriation of initial capital or
that comply with the tenets of Islam, which can not be satisfied within the Gulf area alone. Such investments can be found in the emerging markets of Asia, especially in China which is best accessed from Hong Kong”.
The future of Islamic investment What is the outlook for Islamic investment in emerging economies and new Islamic fi- nance centres? As the world continues to recover from global recession, these types of countries can expect their economies to keep growing, thus attracting more invest- ment. It is up to these countries to maxim- ise this potential by continuing to develop their legislation in such a way that allows sharia’a-compliant investment funds to be set up. The marketing of such funds as socially responsible to Muslims and non-Muslims alike is important. Jurisdic- tions such as Brunei and Hong Kong, with sizeable Muslim populations, should strive to make the most of this potential target market.
The overall regulatory
environment
With the global sukuk market projected to recover in late 2010, emerging countries should also keep their eyes on opportuni- ties to attract investors using this Islamic paper. The onus has been on sovereign is- suers of sukuk for the past few years and so sovereign states must continue to issue sukuk if they wish to attract foreign Islamic
The following year, Deputy Chief Executive of the Hong Kong Monetary Authority Eddie Yue pointed towards other factors that make the city-state ideal for Islamic investment (Zuberi, 2008). During a visit to Dubai to promote Hong Kong as an emerging Islamic finance hub, Yue stated, “What makes Hong Kong a natural destination for Islamic funds is our deep and highly liquid capital markets. Almost all the most actively traded financial instruments are available for exchange in Hong Kong, and that gives Islamic investors a much wider choice of where to place their funds. “The abundance of oil-driven liquidity generates a huge appetite for investments
investment. New Islamic finance centres would do well to follow the example of the UK, which just this year passed legislation to encourage the corporate issuing of sukuk. If corporates worldwide can be convinced to start issuing sukuk again, this will only benefit emerging countries, as international entities will flock to them in order to set up sukuk issuances from their shores.
The demand for Islamic investment in emerging jurisdictions is definitely there; it is now up to these jurisdictions to decide how to grasp this opportunity and assure Islamic investors that investment exposure to these countries will be of the most benefit to them.
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