SC tightening rules for US$307b Islamic stocks
KUALA LUMPUR: Malaysia is tightening rules for the US$307 billion (RM995 billion) of stocks now deemed syariah-compliant as it seeks to attract more investment from overseas Muslims.
The Securities Commission (SC) will require companies to limit debt and cash that do not conform to Quranic principles to less than 33 per cent of total assets to qualify for syariah listing, from no provision previously, said Zainal Izlan Zainal Abidin, SC's executive director for the Islamic capital market.
The regulator will publish a revised list of equities next month from the current 801 that comply with religious tenets, he said.
The stricter screening is in line with international practice and could potentially spur capital inflows, Zainal Izlan said in an email interview recently.
The new regulations put the nation on a par with the conditions needed for inclusion in the Dow Jones Islamic Market World Index, which has a market capitalisation of US$14.9 trillion.
"With harmonisation of standards to global expectations, it definitely would open up the market to a wider investor base, especially from the Middle East," said Alhami Mohd Abdan, OCBC Al-Amin Bank Bhd head of international finance and capital markets, in an interview here yesterday.
The SC announced the amendment in June last year, with companies given 17 months to comply. Fund managers will get a six-month grace period from November, said Zainal Izlan.
The Dow Jones Islamic Market World Index, which tracks global shares that meet syariah investment guidelines, climbed 11.2 per cent this year. That compares with a 13.2 per cent advance in the Dow Jones Global Index of conventional equities. Bloomberg