| SYDNEY, June 19
SYDNEY, June 19 Malaysia's securities commission
is revising its guidelines for equities which qualify for
Islamic investment, in a move that could increase the appeal of
the country's sharia-compliant funds industry to Gulf investors.
Under the previous standards, investment was banned or
restricted in companies that were involved in industries deemed
to be unethical, such as gambling, alcohol and tobacco.
These restrictions are now being made more stringent, so
that a lower level of exposure to those industries is
unacceptable for Islamic investment, according to a statement by
the securities commission on Monday.
The revised guidelines also include two new financial
standards which filter out excessively cash-rich and debt-ridden
companies, in order to limit exposure to interest payments and
pure monetary speculation, which are unacceptable in Islam.
Enhancing the "robustness" and "competitiveness" of
Malaysia's fund management industry at the domestic and
international levels was a motive behind the revisions, the
commission said in a statement.
The new guidelines will come into effect in November, and
Islamic fund managers will then have six months to comply with
The attractiveness of Malaysia's sharia-compliant funds to
investors from the Gulf has been limited by the fact that
Malaysian standards have been less strict than those advocated
by many Islamic scholars in centres such as Bahrain and Saudi
Arabia. The new Malaysian guidelines should help solve this
problem, fund managers said.
"This is a step in the right direction," Monem Salam,
president of investment firm Saturna Sdn Bhd in Malaysia, told
Reuters, adding that the move would help harmonise industry
practices across the globe.
Malaysia's methodology is still less strict than the Gulf's,
but the inclusion of too many standards could hurt equity
portfolios, so the regulator opted for a moderate approach, he
In practice, Islamic fund managers have additional standards
of their own on top of the ones dictated by the securities
commission, which will cushion the impact of the revision.
Salam said it was now up to regulators in the Gulf to
respond to Malaysia's initiative in a way that would encourage
cross-border investment. "The GCC (Gulf Cooperation Council)
countries should take note and meet them half-way."
As of April 30 there were 165 Islamic mutual funds with
assets of 29.9 billion ringgit ($9.5 billion) in Malaysia, out
of a total of 595 mutual funds of all descriptions, according to
securities commission data.
The securities commission's move follows the launch last
month of an Islamic interbank facility by the Malaysian central
bank, an innovation seen as making the country's money markets
more appealing to Gulf-based Islamic banks.
(Reporting by Bernardo Vizcaino; Editing by Andrew Torchia)