Malaysia to offer more Islamic traded funds

MALAYSIA will launch a second tranche of the Islamic exchange traded fund (ETF) later this year, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said.

The second tranche will be in a foreign denomination and open for participation by international investors, she said at the Malaysia Country Showcase in Amman, Jordan, yesterday. The text of her speech was released in Kuala Lumpur.

Zeti said Asia's first Islamic exchange traded fund (ETF) was issued in January this year valued at the equivalent of US$262.5 million (RM840 million).

ETF is a unit trust fund that is listed and traded on a stock exchange and designed to track the performance of an index.

The government last year said it will start a RM3.5 billion ETF to aid its plan to gradually sell down shares in government-linked companies (GLCs) to boost liquidity in the stock market.

Zeti said Malaysia maintains a liberal foreign exchange administration regime where investors are free to obtain ringgit and foreign currencies to fund their investments.

"There continues to be free mobility of inward and outward movement of funds relating to both foreign direct investment and portfolio investments," she said.

The first tranche of the exchange traded fund was denominated in ringgit and is Asia's first Islamic ETF, giving investors immediate exposure to 25 leading Malaysian stocks.

It is managed by i-VCAP Management Sdn Bhd, a wholly-owned subsidiary of state-owned fund manager Valuecap Sdn Bhd.

Zeti said Malaysia's capital market, as an investment destination, offers a wide range of world-class products.

The country has also grown into the world's largest Islamic bond market, accounting for about 60 per cent of global Islamic bonds outstanding which are worth about US$100 billion (RM322 billion).