Investment gif
market-makers regardless whether they are providing liquidity for conventional or Islamic ETFs. “We require them to make bid-offers just like any other. On short-selling for Is- lamic ETFs, there is no pronouncement by the Shariah advisory council permitting such acts at present” says Maimunah.
ETFs are set to grow substantially and could be a real spearhead for the Islamic financial sector. In Islamic financial hubs, such as Ma- laysia, ETFs have been a crucial presence in boosting the country’s capital market. It has also helped to spearhead more foreign investments by attracting investors from all over the world.
The Dow Jones Islamic Market Malaysia, for example, is opening up a world of oppor- tunities for the Islamic ETF sector, and will help to push the country forward for lucra- tive investments. RAM Holdings Bhd’s chief economist, Dr Yeah Kim Leng, announced in a statement “With the conducive environ- ment and excess glo- bal financial liquidity, there is still a huge amount of funds out there, both pri- vate and sovereign, that are looking for places to invest. One good place [for these are] Islamic ETF[s]”.
Islamic ETFs present investors with vari- ous opportunities around the world, es- pecially on platforms
such as Dow Jones, which has made a signifi- cant presence for itself in the ETF sector. The scope is vast for the Islamic financial sector, and with Islamic ETFs pushing the industry along investors can see promising scope for lucrative investment deals. MIDF Amanah Investment Bank’s equity economist Imran Nurginias is reported to have said that the expected investment in the Islamic ETF will be useful to help cushion any fall in invest- ments caused by the global credit crunch. Interest in Islamic investments from around the world is on a high as many investors, business professionals and entrepreneurs are looking into the various Shariah-compli- ant forms to make investments and obtain lucrative profits.
It has also been reported that the Shariah- compliant fund has an authorised fund size of 10 billion units and an initial size of 840 million units. It also has the participation of Government-Linked Investment Companies (GLICs). “There is a shortage of good Islamic
The participants in ETF structure are as follows:
investments and with the rising demand for such products, [and] this Islamic ETF by i- VCAP is definitely good news for investors. Couple this with the sharp rise in oil reve- nues and the opportunities for the ETF are very bright,” RAM Holdings Bhd’s chief econ- omist Dr Yeah Kim Leng reportedly said. In conclusion, GIF has highlighted the vari- ous possibilities for Islamic ETFs in the highly competitive financial market. There is huge potential for further expansion within this sector and a further rise and demand from customers around the world who want to tap into the lucrative industry. Many investors from around the world see Islamic ETF as the perfect alternative to conventional ETF.
Figure 3: Participants in the Islamic ETF Structure The Manager: Manages/Administers the ETF in line with the trust deed and securities laws.
The Trustee: Acts as custodian of an ETF’s assets. It also ensures ETF is administered in line with the trust deed and securities laws.
The Participating Dealer: Performs or facilitates in-kind creation and redemption of ETF units. It can also act as a liquidity provider to facilitate the trading of ETF units on the stock exchange.
The other Liquidity Providers (if any): Aid in providing liquidity to the ETF. The Investors: Invest in ETF units via their brokers.
Source: Financial Islam
This is mainly due to the fact that Islamic ETF follows the principles of Shariah financing and investors know the various advantages when dealing with Shariah-compliant meth- ods of financing and Islamic instruments. The prohibition of interest is particularly ad- vantageous for investors when it comes to Is- lamic contracts and it is particularly benefi- cial when Investors are considering the advantages of deal- ing their investments on an Islamic ETF global platform. The scope for Islamic ETF looks promising with a bright future in pro- moting and spear- heading the Islamic finance industry into the estimated US$2 trillion sector.
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References and Further Reading
• Islamic ETFs (2011) Financial Islam all about Islamic Banking and Insurance, Retrieved from:
http://www.financialislam.com/islamic-etf.html • J. Foster (2011) Islamic ETFs are a go go, Zawya, Retrieved from:
http://www.zawya.com/story.cfm/sidZAWYA20110529085730 • G.Lee (2010) New Frontiers for Islamic Finance, Retrieved from:
http://www.risk.net/asia-risk/feature/1933074/frontiers-islamic-finance • T. Shamsiah (2010) Islamic ETF Good for Malaysia Economy, Retrieved from:
http://islamicfinancespot.blogspot.com/2008/01/experts-islamic- etf-good-for-malaysias.html • Z. Akhtar Aziz, (2006) Focus on Human Capital Development in Malaysia, BIS Review, Retrieved from:
http://docs.google.com/ viewer?a=v&q=cache:QNpjzL5F-68J:
www.bis.org/review/r061220b.pdf+strategic+leadership+islamic+finance • Von Pock (2006) Strategic Management in Islamic Finance, DUV Publishers, Pg75 • D. Baltaji (2010) HSBC Plans its first Shariah ETFS this Year Retrieved from:
http://www.bloomberg.com/news/2010-10-06/hsbc-plans-its-first- persian-gulf-shariah-etfs-islamic-finance.html • C. Klass (2009) All about the customer, Islamic Finance Asia, Retrieved from:
http://www.islamicfinanceasia.com/article.asp?nm_id=18904 • U.S Marshall (2010) International Marketing, Country Decisions and Strategies, Retrieved from:
http://www.consumerpsychologist.com/interna- tional_marketing.html • Internal Marketing (2011) Definition by Wickpedia, Retrieved from:
http://en.wikipedia.org/wiki/Internal_marketing • Z. Akhtar Aziz, (2006) Focus on Human Capital Development in Malaysia, BIS Review, Retrieved from:
http://docs.google.com/ viewer?a=v&q=cache:QNpjzL5F-68J:
www.bis.org/review/r061220b.pdf+strategic+leadership+islamic+finance • Al Shawi, Irani & Baldwin: (2003) Benchmarking Information Technology, An International Journal of Benchmarking- • Iqbal M, Islamic and Conventional Banking in the 90’s (2000): A comparative study: Loughborough University Press • Warde I, Islamic Finance in The Global Economy (2000): Edinburgh University Press
2012 April Global Islamic Finance 69
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