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ISLAMIC WEALTH MANAGEMENT


The new spice trade


Like the spice trade of the 18th and 19th centuries, South-East Asia (SE Asia) is again positioned at a historic and geographic juncture – this time in the development of Islamic wealth management – as global wealth shifts from West to East.


S Country Indonesia


Saudi Arabia Iran


United Arab Emirates Malaysia Singapore Egypt


Kuwait Qatar


Bahrain


(for comparison) Australia China USA


Source: IMF


707 444 407 302 238 223 218 131 129 22


outh-East Asia is well positioned to link the high- net-worth market of the Middle East/GCC (Gulf Cooperation Council nations) to the economic powerhouses of North East Asia – China, Japan,


South Korea and Taiwan. The growing links between Asia and the Middle East is


reflected in statistics that show Asia’s share of total trade with the GCC rising from just 10 per cent in 1980 to 36 per cent in 2009, according to Economist Intelligence Unit’s 2011 report, GCC trade and investment flows: The emerging- market surge. This growth provides opportunities in Islamic wealth


management. Malaysia and Singapore are already competing as global Islamic financial centres. Their opportunity set is the Middle East/GCC high-net-worth investor (HNWI) population which gained 10.4 per cent in 2010 to 0.4 million, while wealth jumped 12.5 per cent to US$1.7 trillion, according to the latest 2011 World Wealth Report by CapGemini/Merrill Lynch. This compares to 3.3 million HNWI


2010 GDP (nominal) US$ billion (rounded)


in Asia (controlling US$10.8 trillion); 3.4 million HNWI in North America (US$11.6 trillion) and 3.1 million in Europe (US$10.2 trillion). Although much smaller, the Middle East market grew faster than the developed stated regions above, when measured by both HNWI population and dollar wealth. South-East Asia also benefits from having


1,236 5,878


14,657


the world’s largest Muslim-majority nation within its region – Indonesia. Together with Malaysia, there is already a critical mass of Islamic-centric wealth in the region. The table below provides a comparison of GDP size for selected SE Asia and Middle East nations. Globally, Islamic financial assets are


expected to expand to US$4 trillion over the next few years from current levels of US$1.2 trillion, according to Y.Bhg Tan Sri Zarinah Anwar, Chairman of the Securities Commission Malaysia, speaking at the 2nd Annual World Islamic Banking Conference – Asia Summit in June 2011.


30 FAMILY OFFICE: ASIA TOMORROW Zarinah Anwar notes that Malaysia accounts for 72.5 per


cent of global Sukuk (Islamic equivalent of bonds) issuances by domicile in 2010 and 65 percent of global sukuk outstanding by domicile as at December 2010. In addition, Malaysia has a significant Islamic equity market and is home to four of the world’s 10 largest Shari’a-compliant companies. Malaysia also provides the Bursa Suq Al-Sila’, an


international commodity trading platform managed by the Malaysian stock exchange to enable liquidity management by financial institutions through cross-border, multi-currency, commodity-based Islamic financing and investment transactions pursuant to the Shari’a principles of Tawarruq, Murabahah and Musawamah. An indication of the size of Islamic finance is reflected


in the recent launch of the Bloomberg Islamic Finance Platform (ISLM). The platform offers information resources for investing in fixed income, equities and money markets that comply with Shari’a, including; ƒ Sukuk –Coverage of more than 1500 Islamic bond issues globally including fatwa endorsements and structured diagrams of the financial instruments. ƒ Equities –Screening of over 35,000 Shari’a-compliant stocks. ƒ Funds –Database of more than 500 Islamic funds with ability to research and monitor debt, commodities, equities and exchange traded funds (ETFs). ƒ An Islamic Community Database of more than 250 Shari’a scholars with details on which sukuk they have rated, boards they represent and their fatwa endorsements. ƒ A listing of more than 70 Islamic banks and profiles on all prominent Islamic institutions and regulators. The political uncertainty in much of the Middle East, and


the decline of Europe/UK’s financial markets (relative to the growth in Asia), suggests that Middle East/GCC HNWI wealth will be seeking to diversify away from these two regions. South-East Asia is well positioned to capture this opportunity, as well as to develop its own home-grown Islamic wealth management sector.


David Chin Managing Director, Basis Point Consulting


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