CORRECTED - CORRECTED-OFFICIAL-Asian Finance Bank eyes $500 mln Malaysia fun

(Corrects paragraph 14 to show that bank's representative offices will only be in Singapore and Brunei, with Kuala Lumpur office servicing other countries, after executive corrected his remarks)

JAKARTA, May 7 (Reuters) - Asian Finance Bank, one of three foreign Islamic lenders in Malaysia, plans to set up an Islamic property fund of up to $500 million in 2009 to tap what it considers an undervalued market.

The bank, owned by Qatar Islamic Bank QISB.QA, RUSD Investment Bank Inc of Saudi Arabia and Global Investment House of Kuwait, also plans to set up a fully-fledged Islamic bank in Indonesia by 2010 as part of its effort to build in-roads into Asia.

Faisal Alshowaikh, chief executive of Asian Finance Bank, told Reuters in an interview the property market was relatively subdued following the global credit crisis, but he saw potential for a property fund in Malaysia.

"Right now the property market has suffered from sub-prime, so it is not something I would pursue aggressively," he said, referring to defaults on low-end mortgages in the United States that have rattled markets worldwide.

"But this is something we have in our minds to set up. When you look at Indochina and other countries like Korea, Singapore, Hong Kong, I think the property market is very much undervalued in Malaysia."

The global Islamic finance market is one of the fastest growing in the world. Islamic assets are growing at an annual pace of 20 percent and are set to hit $2 trillion in 2010 from the current $900 billion, largely thanks to a flood of petrodollars, Ernst & Young said in February.

Asian Finance Bank currently has a representative office in Indonesia, a country analysts say has the potential to become a major player in global Islamic finance because around 85 percent of its population is Muslim.

"It is a big market for Islamic banking which needs to be aggressively explored,"Alshowaikh said on the sidelines of an Islamic banking conference in Jakarta.