The number of shariah-compliant stocks listed on the local bourse can be increased by creating a separate Islamic shares (i-shares) section for banking groups that derive a portion of their profits from Islamic finance, said Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar.
“What if Malaysia can create a separate listing of Islamic or I-shares from banking groups that derive a portion of their profits from Islamic finance?” the former banker said in his keynote speech at the International Islamic Fund and Wealth Management Forum today.
“For example, up to 25% of Malayan Banking Bhd (Maybank)’s profit is derived from Islamic finance. And since Maybank Islamic Bank Bhd is a wholly-owned subsidary and an integral part of Maybank, we can designate for example, say 20% of Maybank shares as ‘Islamic shares’ via some ring-fencing arrangements,” he said. Based on Maybank’s market capitalisation of RM97 billion, Tan Sri Abdul Wahid said the separate listing of i-shares will create a new class of shariah-compliant investment instruments worth RM9 billion.
“The same principles can be applied to CIMB (Group Holdings Bhd) and RHB (Bank Bhd), which have sizeable Islamic finance activities within them,” he added.
The former minister in charge of economic planning said the separate listing of i-shares is one of three suggestions he has, that can be explored to boost the country’s Islamic capital market, in which the financial sector has the least shariah-compliant listed securities at 6% of the total number of financial counters quoted on Bursa Malaysia.
“There are only two listed shariah-compliant financial counters out of 33 listed securities in the financial sector,” he noted.
Tan Sri Abdul Wahid’s two other proposals are the listing of shariah-compliant development financial institutions such as government-owned Bank Simpanan Nasional Bhd and Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat), as well as the formation of a second-listed Islamic universal banking group, apart from the existing BIMB Holdings Bhd, the banking subsidiary of pilgrim fund Lembaga Tabung Haji.
“What about forming a second-listed Islamic universal banking group such as Malaysia Building Society Bhd, Bank Muamalat Malaysia Bhd, Malaysian Industrial Development Finance Bhd or one of the larger foreign-owned Islamic banks?” he asked.