Malaysia launched on Monday Asia’s first Islamic exchange traded fund, as part of efforts to cut the state’s holding of listed equity and boost its bid to become a global Islamic financial hub.
The fund has 25 underlying stocks including plantations to energy group Sime Darby, mobile phone firm DiGi, shipper MISC, builder Gamuda and toll road operator PLUS Expressway, its manager i-VCAP Management Sdn Bhd said.
Second Finance Minister Nor Mohamed Yakcop said the fund would help boost the appeal of the Malaysian stock market.
“The National Exchange Traded Fund contributes on all these counts for the equity market i.e. depth, diversity and liquidity,” he said at the launch of the fund.
The fund has an authorised size of 10 billion units.
Malaysia’s holdings in state-linked firms make up nearly 40 percent of the $292 billion local market. Investors complain stocks are too tightly held and state investment arm Khazanah Nasional is reforming these firms to reduce state equity.
A more vibrant local market would help Malaysia to attract capital and enhance its bid to become a global Islamic finance centre.
Mostly Muslim Malaysia is in a race with Bahrain, Dubai and Singapore to become a global Islamic finance hub. Malaysia has an Islamic finance industry with about $38 billion of assets ranging from stocks and insurance to home loans and pawnbroking.
Islamic banking assets make up over 12 percent of total bank assets.