Shariah Investing on BursaMalaysia-Islamic

ISLAMIC CAPITAL MARKET

Shariah Investing on

Presentation by:
Jamaluddin Nor Mohamad

17 April 2017

Topics

PART 1
PART 2
PART 3
PART 4

2

PART 1

OVERVIEW OF ISLAMIC CAPITAL MARKET

Bursa Malaysia: An Integrated Exchange

We operate the stock market We offer 12 derivatives As a leading Islamic capital We operate the Labuan
in Malaysia where investors market, we operate a market
can participate in the buying products comprising offering diverse Shariah International Financial
and selling of shares on two compliant products. Our
types of markets, the Main commodity, equity and Bursa Suq Al-Sila’ (“BSAS”) is Exchange, where issuers can
Market and the ACE Market. a commodity trading platform
financial futures and options. specifically dedicated to list their non-Ringgit
TWO TYPES OF MARKETS: facilitate Islamic liquidity
Main Market: 787 cos management. We have 24 securities.
ACE Market: 113 cos Sukuk Listings valued at
• 18 Sectors that cover 60 12 DERIVATIVES PRODUCTS: USD$54 billion. TOTAL MARKET CAP:
5 Commodity Futures: USD$27 billion
economic activities • FCPO OTHER SHARIAH COMPLIANT • 22 Bond Listings
• Total Market Cap: • FUPO OFFERINGS INCLUDE: • 11 Sukuk Listings
• FPKO • 670 i-Stocks
RM 1.80 trillion • FGLD • 4 i-ETFs
• FPOL • 4 i-REITs
PRODUCTS: 3 Financial Futures: • 3 ETBS
• 644 Structured Warrants • FMG3 • 2 i-SPACs
• 57 Warrants • FMG5
• 16 REITs • FKB3
• 10 Foreign Listings 2 Equity Futures:
• 8 ETFs • FKLI
• 4 SPACs • SSFs
• 1 Stapled Securities 1 Commodity Options:
• 1 Closed-End Fund • OCPO
1 Equity Options:
• OKLI

Listing Trading Clearing Settlement Depository

4

Bursa Malaysia: An Integrated Exchange

How Bursa Malaysia plays its role in the Islamic capital market

Non-Shariah

Equities,

37% Islamic AUM,
(RM617.4 bil) 20%

as at Dec 2016 (RM138.5 bil) As at 31 December 2016, the size of
as at June 2016 Sukuk Malaysia’s Islamic Capital Market is
Bond Market,
42% Conventional RM1.67 trillion
(RM496.0 bil) AUM, Market,

as at June 2016 80% 55%

(RM637.3 bil)
(RM537.8 bil) as at June 2016
as at June 2016
Shariah

Equities,

63%

(RM1,050.0 bil)

as at Dec 2016 5

Malaysian Islamic Capital Market: In 1990s

The history began and created strong fundamental…

1996

1994

1990 1998

1993 1995 1997

1999

6

Malaysian Islamic Capital Market: In 2000s

The history evolved… 2007

2001

2005

2009

2000 2002

2006

2008

7

Malaysian Islamic Capital Market: In 2010s 2016

And the achievement continues…

2014
2011

2013 2015

2012 8

PART 2

SHARIAH-COMPLIANT PRODUCT OFFERINGS

Shariah-compliant Products

Stays away from prohibited elements

RIBA GHARAR (contractual MAYSIR (gambling) Other
(interest/usury) uncertainty) non-permissible
 Element of
 Excess or surplus  Uncertainties in exploitation activities
charged over contracts regarding
and above loan, contracting  Pure games of  Conventional
a deferred price parties, subject chance where one insurance
or debt matter, price etc. party gains at the
expense of the  Non-halal food or
 Financial  For justice & loss to the another related products
services based fairness - avoid party e.g.
on riba future disputes gambling &  Tobacco-related
(interest) among contracting gaming product or
parties activities
Al-Quran mentions about Al-Quran mentions about
prohibition of Riba: Al-Quran mentions about prohibition of gambling:  Entertainment
prohibition of Gharar: that contradict to
“And Allah has permitted “They ask thee Shariah
sale (trade) and prohibited “O you who believe! Eat not concerning wine and
up your property among gambling. Say: in them is  Share trading in
Riba (usury)” yourselves unjustly by the great sin and some Shariah non-
[Al-Baqarah 2: 275] falsehood and deception, profits from men, the compliant
except it be a trade sin is greater than the securities
amongst you, by mutual
consent” profits  Other non-
[Al-Nisa 4:29] [Al-Baqarah: 219] permissible
activities
10

Shariah-compliant Product Offerings

Readily available integrated end-to-end infrastructure for issuers and
investors seeking Shariah-compliant instruments

PLCs/
Non-PLCs

Investment
Banks

Fund
Arrangers

GLICs

SPV
Companies

Government

11

Securities Screening Methodology

Development of screening methodology to determine the Shariah
compliance of securities traded on Bursa Malaysia

Shariah compliance review is undertaken for Each public listed company is reviewed based on
securities of companies listed on the Exchange & the latest annual audited financial statements
during pre-initial public offering (IPO) companies

For pre-IPO companies, the screening for Shariah- The list of Shariah-compliant securities is updated
compliant status is made upon application and published every May and November
(voluntary)

Pre-Revision Post Revision
(since establishment in 1995) (Effective from November 2013)

Quantitative Assessment Quantitative Assessment 12

 4 activity-based benchmarks  Two-tier quantitative approach:
<5%; <10%; <20%; <25%  Activity-based benchmarks
• 2 activity-based benchmarks
Qualitative Assessment <5%; <20%
 Financial ratio benchmarks (<33%)
 Public perception or image • Cash Over Total Assets
 Image of the company’s activities • Debt Over Total Assets

“…To further build scale in the Shariah-compliant equity and Qualitative Assessment
investment management segments as well as expand the
Islamic Capital Market’s (ICM) international reach,…”  Public perception or image
 Image of the company’s activities
~ Capital Market Master Plan 2~

How the Screening is Done?

Public Listed Companies Screening Process? Status

Core Activity: NO Shariah non-
• Gambling compliant
• Conventional banking
• Conventional insurance YES Could be
• Manufacturing of liquor Shariah-compliant
• Other non-permissible How?
or otherwise
activities
13
Core Activity:
• Construction
• Plantation
• Other permissible activities

Subsidiaries Involved in:
• Tobacco
• Gambling
• Insurance
• Conventional banking

Activity-based Benchmarks Benchmark
Ratio
Business Activities
5%
 Conventional banking
 Conventional insurance 20%
 Gambling
 Liquor and liquor-related activities 14
 Pork and pork-related activities
 Non-halal food and beverages
 Shariah non-compliant entertainment
 Interest income from conventional accounts and instruments
 Tobacco and tobacco-related activities
 Other activities deemed non-compliant according to Shariah

 Hotel and resort operations
 Share trading
 Stockbroking business
 Rental received from Shariah non-compliant activities
 Other activities deemed non-compliant according to Shariah

Financial Ratio Benchmarks

1 Cash Over Total Assets < 33% *

Cash will only include cash placed in conventional accounts and instruments,
whereas cash placed in Islamic accounts and instruments will be excluded from the

calculation.

2 Debt Over Total Assets < 33% *

Debt will only include interest-bearing debt whereas Islamic debt/ financing or
sukuk will be excluded from the calculation.

*Both ratios intend to measure Riba and Riba-based elements within a company’s balance sheet.

Qualitative Assessment

Public perception, maslahah or image of the company’s activities
towards Islam.

15

EQUITIES MARKET

Shariah-compliant Instruments

 i-Stocks
 i-Indices
 i-ETFs
 i-REITs
___________________________________

Islamic Capital Market Statistics

The Shariah-compliant regime getting stronger

2010 2011 2012 2013 2014 2015 2016 YTD Mar
2017
Total Market Capitalisation – 803.2 809.6 945.9 1,044 1,028 1,104 1,050
Shariah (RM bil) (63.8%) (63.7%) (65.2%) (62.1%) (63.0%) (65.8%) (63.0%) 1,123
(62.4%)

Total ADV OMT – Shariah 918 1,088 1,042 1,269 1,331 1,285 1,142 1,438
(RM mil) (66.7%) (68.0%) (69.8%) (69.7%) (68.6%) (68.3%) (63.0%) (60.5%)

Total ADV OMT+DBT – Shariah 994 1,134 1,106 1,453 1,396 1,348 1,253 1,531
(RM mil) (66.6%) (67.3%) (69.9%) (71.2%) (68.3%) (68.4%) (63.7%) (60.4%)

Total Number of Shariah- 849 837 819 652 685 667 671 670
compliant PLCs (88.1%) (88.7%) (88.3%) (71.3%) (75.6%) (73.9%) (74.2%) (74.4%)

Total Number of Shariah- 846 837 817 657 693 678 682 681
compliant Counters (PLCs + (86.7%) (87.1%) (86.7%) (70.2%) (73.3%) (73.8%) (74.1%) (74.3%)
REITS + ETBS + ETFs)

964 Number of Shariah PLCs Number of Shariah Instruments

964 944 927 915 906 903 903 901 Stocks Jun 2016 Dec 2016 Feb 2017 Mar 2017
Indices 669 671 671 670
(8884.19%)(8883.77%()8881.39%) (7615.32%)(7658.65%)(7636.97%)(7647.21%)(7647.40%) ETFs 3 3 3 3
REITs 4 4 4 4
2010 2011 2012 2013 2014 2015 2016 Mar ETBS 4 4 4 4
3 3 3 3
No. of Shariah PLCs No. of PLCs 2017

Source: Bursa Malaysia 17

Islamic Capital Market 2016 Highlights

Islamic Capital Market Growth from 2010 through 2016

Market Capitalisation ADV - OMT Velocity No. of Shariah PLCs

+ + 27% 74.2%
31% 24%

Market 1,200 946 1,044 1,028 1,104 1,050
Capitalisation 2012
(RM mil) 1,000 810 2013 2014 2015 2016
2011
Growth of 800
Market Capitalisation
from 2010 to 2016 600 803

+31% 400

FBM Hijrah 200
Shariah Index
-
Performance
from 2010 to 2016 2010

ADV – OMT 20,000 +14.99% +13.01% +1.01% -0.94% -3.42%
(RM mil) 15,000
10,000 +5.41% 12,675 14,324 14,469 13,904 13,428
Growth of ADV - OMT 10,457
from 2010 to 2016 5,000 11,023
-
+24%
2010 2011 2012 2013 2014 2015 2016

1,500 1,088 1,269 1,331 1,285 +24%
1,000 1,142
918 1,042
500 2010
-

2011 2012 2013 2014 2015 2016 18

Shariah-compliant Instruments

i-Stocks i-Indices i-ETFs

Total: 670 1. FTSE Bursa Malaysia 1. MyETF Dow Jones Islamic
EMAS Shariah Index Market Malaysia Titans 25
Main Market: 588 (MyETF-DJIM 25)
2. FTSE Bursa Malaysia
Construction 41 Hijrah Shariah Index 2. MyETF MSCI Malaysia Islamic
Dividend (MyETF-MMID)
Consumer 100 3. FTSE Bursa Malaysia
Small Cap Shariah Index 3. MyETF MSCI South East Asia
Finance 2 Islamic Dividend
i-REITS (MyETF-MSEAD)
Industrial 171
1. Al-Aqar KPJ REIT 4. MyETF Thomson Reuters
Infrastructure 4 Asia Pacific ex-Japan
2. AXIS REIT Agribusiness (MyETF-AGRI)
Plantation 33
3. KLCCP REIT
Properties 75
4. Al-Salam REIT
Technology 25

Trading/ Services 137 ETBS

ACE Market: 82 3 1. 1st DanaInfra ETBS
Construction 16 Stock Code: 0400GA
Industrial 47
Properties 16 2. 2nd DanaInfra ETBS
Trading/ Services Stock Code: 0400GB

3. 3rd DanaInfra ETBS
Stock Code: 0400GC

19

Shariah Indices

FTSE Bursa Malaysia Index Series Design

FTSE Bursa FTSE Bursa FTSE Bursa
Malaysia EMAS Malaysia Hijrah
LaMragleayCsiaapKLCI
Shariah Shariah
70%
195 30

Main Market FTSE Bursa 30 FTSE Bursa FTSE Bursa
Malaysia Top 100 Malaysia EMAS Malaysia Small Cap

MMaFildaTySsCEiaaBpMuridsa70 98%* Shariah

20% 255 129

100 70 2%* FTSE Bursa
Malaysia Palm Oil
SmFaTlSlECBauprsa 385
111 Plantation
Mala1y0Cs%iaapSmall
9
155
FTSE4Good Bursa
FTSE Bursa Malaysia Fledgling Malaysia
38
ACE FTSE Bursa Malaysia ACE
Market  FTSE Bursa Malaysia EMAS Shariah Index
 FTSE Bursa Malaysia Hijrah Shariah Index
FTSE Bursa Malaysia Asian Palm Oil Plantation 18  FTSE Bursa Malaysia Small Cap Shariah Index

Developed, advanced emerging and secondary emerging as classified by  Review Dates
FTSE in the Asia Pacific region ex Japan, Australia, New Zealand Semi-annually in June and December

Constituent numbers are as of Dec 2016.
*Based on full market capitalisation

Source: FTSE 21

Index Performance & Growth

Shariah indices have consistently outperformed the FBM KLCI

Growth Percentage
60% (%)

50%

40%

30%

20%

10%

0% 2011 2012 2013 2014 2015 2016 YTD Mar 2017
2010

FBM KLCI FBM Emas Shariah FBM Hijrah Shariah FBM Small Cap Shariah

Year-end

Index

2010 2011 2012 2013 2014 2015 2016 YTD Mar 2017

FBM KLCI 1,518.91 1,530.73 1,688.95 1,866.96 1,761.25 1,692.51 1,641.73 1,740.09
(0.78%) (11.19%) (22.91%) (15.95%) (11.43%) (8.09%) (14.56%)
FBM Emas 10,058.15 10,300.29 11,520.73
Shariah (2.41%) (14.54%) 13,051.59 12,507.02 12,800.65 12,014.42 12,811.34
(29.76%) (24.35%) (27.27%) (19.45%) (27.37%)
FBM 10,456.86 11,022.63 12,674.93
Hijrah - (5.41%) (21.21%) 14,323.63 14,468.70 14,332.58 13,427.77 14,101.96
Shariah (36.98%) (38.37%) (37.06%) (28.41%) (34.86%)
- 10,482.56
FBM 14,645.47 13,870.23 15,189.63 13,759.07 16,010.22
Small Cap (39.71%) (32.32%) (44.90%) (31.26%) (52.73%)
Shariah
21
Source: Bursa Malaysia

Shariah-compliant ETFs (i-ETFs)

Efficient way to diversify

21 March 2014 3 December 2015

Listing of MyETF Listing of MyETF Thomson
MSCI Malaysia Reuters Asia Pacific

Islamic Dividend ex-Japan Agribusiness
(MyETF-MMID) (MyETF-AGRI)

Listing of 7 May 2015

21 January 2008 Listing of MyETF MSCI
South East Asia Islamic
Listing of MyETF Dow
Jones Islamic Market Dividend
(MyETF-MSEAD)
Malaysia Titans 25
(MyETF-DJIM 25)

MyETF-DJIM 25 MyETF-MSEAD

NAV (March 2017) RM305.53 mil NAV (March 2017) RM49.24 mil

MyETF-MMID MyETF-AGRI

NAV (March 2017) RM54.59 mil NAV (March 2017) RM20.54 mil

22

Shariah-compliant REITs (i-REITs)

The Easiest Way to Invest in Large-scale Real Estate

Launched by KPJ Healthcare World’s first Shariah-compliant
Bhd in 2006; Stapled Securities;

World’s first i-REIT and ASEAN’s 3rd largest REIT
hospital i-REIT Properties: Offices, retail

Properties: Hospitals, nursing properties
colleges, commercial

Converted into Islamic in 2008; Launched & listed
Office and industrial properties in September 2015;
Properties: Offices, industrial, Properties: Commercial retail,
warehousing/ logistics, manufacturing offices, industrial purposes

facilities, hypermarkets

23

EXCHANGE TRADED
BONDS & SUKUK
(ETBS)

___________________________________

ETBS: An Introduction

What is ETBS?

Bonds in the past have only been available to institutions and high net

worth individuals (HNWI). Bursa has brought this product into the

exchange to enable retail to access.

ETBS, also known as bonds or sukuk, are fixed income securities that are

listed and traded on the stock exchange. ETBS are investment grade

instruments which are aimed at tapping investors whose risk appetite

tend to be more conservative and/or seeking diversity in the stock

market. ETBS are issued either by companies or governments (the issuer)

to raise funds for their requirements/ needs.

ETBS utilizes the same

mechanism as that of buying

and selling shares, in which

each investor needs to have

Exchange a trading account (with the
broker) and a Central

Depository System (CDS)

Investment Banks/ account.

Securities Firms/

Banks Investors/ Traders

25

A New Asset Class Launched in January 2013

Maiden Issuance by DanaInfra Nasional Berhad in February 2013 under its
RM21.0 billion Islamic Medium Term Note Sukuk Murabahah Programme for
the nation’s MRT Project

1st ETBS – Stock Code: 0400GA 2nd ETBS – Stock Code: 0400GB 3rd ETBS – Stock Code: 0400GC

Listing Date 8 February 2013 Listing Date 28 November 2013 Listing Date 27 August 2014

Maturity Date 8 February 2023 Maturity Date 31 October 2028 Maturity Date 23 July 2021
Tranche Value RM300 million Tranche Value RM100 million Tranche Value RM100 million
Tenure 10 years Tenure 15 years Tenure 7 years
Yield 4% p.a Yield 4.58% p.a Yield 4.23% p.a
Subscription Rate 161% Subscription Rate 219% Subscription Rate 103.95%

Volume, Value and Closing Price as at 31 January 2017 (12-month)

26

PART 3

SHARIAH INVESTING ON BURSA MALAYSIA-I

Maqasid Shariah

Malaysia Shariah Index (ISM) is the world’s first ever Shariah Index - was
introduced in February 2015 as a benchmark to determine a country’s
fulfillment in the objectives of Shariah principles

Maqasid Shariah

Protecting

Faith Self Intellect Posterity Wealth

Shariah Index of Malaysia

Legal Politics Economy Education Health Culture Infra & Social
65.27% Environ.
87.19% 79.19% 82.50% 73.92% 66.47% 68.52%
62.39%

ISM Report 2015: 28
Malaysia scored 75.42% (categorised as “Very Good”)

The Growth of Malaysian Islamic Funds Industry

Malaysian Islamic Fund Assets

Malaysia’s Islamic funds industry has Shariah Mandate 20 Islamic Fund
demonstrated impressive growth (e.g. EPF, TH, KWAP, Management
Companies
PRS)
(6 of the top global
IFMCs are from
Malaysia)

Shariah Best Shariah
Funds Practices Unit Trust
(2016: for Shariah
Islamic AUM Investing Funds
RM149.6 billion – (2016: NAV RM60.9
21.5% to total billion – 17.0% to
industry)
total industry)

RM billion 2010 2011 2012 2013 2014 2015 2016 Retail Shariah
48.0 64.2 79.6 97.5 110.6 132.4 149.6
Islamic AUM 667.9 676.3 #YnotIF
377.0 423.3 505.1 588.4 629.9
Total Fund 19.8% 21.5% 29
Management
Industry

% Islamic 12.7% 15.2% 15.8% 16.6% 17.6%
AUM to Total
Industry

Note:
 Islamic AUM comprises AUM of IFMCs and Islamic Windows
 Data includes assets that are sourced from collective

investment schemes and private mandates

Source: Securities Commission Malaysia

Global Islamic Funds Statistics

Malaysia is the highest in the Global Islamic Assets under Management
(AUM)

30

Global Islamic Finance Assets Outlook

 IFDI expects that total global Islamic finance assets will reach USD3.5 trillion by 31
2021 as a result of continued growth in all sectors globally.

 Islamic banking will likely be the main driver of growth reaching USD2.8 trillion
in assets by 2021, with its share increasing to 80% by 2021 from 73% in 2015.

 Total projected growth will be supported by Islamic banking and other sectors in
the GCC region and other top performing countries in Islamic finance, along with
the rumoured or planned development of Islamic finance in other countries.

Source: ICD-Thomson Reuters Islamic Finance Development Report 2016

Islamic Capital Market Aspiration

The Leading Centre of the Islamic Capital Market

World’s first fully integrated
Shariah Investing on

Staying Relevant Leveraging Strength New Frontier

To further develop Islamic Capital Market To enhance Bursa Malaysia’s To expand Bursa Malaysia’s
& Bursa Malaysia in becoming Shariah-compliant product & domestic & foreign
a vibrant trading centre for services offerings’ visibility client base
in domestic & global market
Islamic-based financial offerings 32

World’s First End-to-End Shariah Investing
Platform launched on 5 September 2016

33

Previous Landscape for Investors Seeking
Shariah-compliant Securities

34

The “First-In-The-World End-to-End
Shariah Investing Platform”

Malaysia’s Comprehensive Islamic Finance Eco-system Would Help
Facilitate the Growth of the Malaysian Islamic Capital Market

Participating Listing Trading Clearing Depository Settlement
Organisations
Bursa Trade Securities 2 Equity Central Islamic
Full-Fledged & (BTS2) Clearing Depository Financial
With Islamic Window System (ECS) System (CDS) Institutions

 1 full-fledged  Efficient and transparent  Efficient system that provides one-stop
Islamic PO price discovery platform
clearing, settlement and depository
 8 POs with  Deep primary market
Islamic window services
and active secondary
 Leveraging on IFIs for final settlement
trading of instruments
for full-fledged Islamic transactions

Our Marketplace Advantage:

 Bursa Malaysia’s fully integrated end-to-end exchange-related facilities will
create a conducive marketplace for Shariah investing

 Robust regulatory, supervisory, Shariah and legal framework

 Product breadth and depth, attractive to global investors and issuers

 Diverse players with global capabilities and connectivity for business deals 35

Resolution of the Shariah Advisory Council of
Securities Commission Malaysia

The Shariah Advisory Council of the Securities Commission
Malaysia (SAC) had at its 185th meeting held on 19 May 2016
resolved that the SAC has no objection to the following:

 The general concept and framework of the
proposed Shariah Investing on Bursa Malaysia

 The “Best Practices in Islamic Stockbroking
Services Undertaken by Participating
Organisations”

 The “Best Practices for Shariah Investing”

36

New Landscape for Investors Seeking
Shariah-compliant Securities

37

Islamic Participating Organisations

List of Islamic POs

Pre Bursa Malaysia-i Launch:
1. BIMB Securities Sdn Bhd (19 August 1994) ~ Full-fledged
2. Affin Hwang Investment Bank Berhad (12 February 2004)
3. AmInvestment Bank Berhad (21 August 2008)
4. CIMB Investment Bank Berhad (21 August 2008)
5. Jupiter Securities Sdn Bhd (21 January 2011)
6. Kenanga Investment Bank Berhad (26 August 2014)
7. Malacca Securities Sdn Bhd (21 June 2016)
8. Maybank Investment Bank Berhad (4 May 2010)
9. RHB Investment Bank Berhad (26 August 2014)

Post Bursa Malaysia-i Launch:
1. Hong Leong Investment Bank Berhad (15 September 2016)
2. TA Securities Sdn Bhd (23 December 2016)

38

Best Practices in Islamic Stockbroking Services
Undertaken by POs

Background of Islamic Stockbroking Services

Best Practices of Islamic Stockbroking Services

 Human Resources – Qualification, Expertise and Experience

 Compliance with Shariah Principles, Concepts and Rulings issued by SAC of SC

 Shariah Adviser

 Supervision of Islamic PO

 Compliance of Operations, Systems and Procedures

 Audit

 Compliance Functions  Comply with Shariah principles
 Shariah Confirmation
 Board of Directors  Deal in Shariah-compliant securities
 Transparency
 Memorandum & Articles of Association  Facilitate the disposal of Shariah
 Advertisement non-compliant securities upon
 Takaful / Insurance reclassification of Shariah-compliant
securities as Shariah non-compliant
following the review by the SAC of
SC.

‘Best Practices in Islamic Stockbroking Services Undertaken by Participating Organisations’ 39
endorsed by Shariah Advisory Council of Securities Commission Malaysia on 19 May 2016

Best Practices for Shariah Investing

40

Shariah Compliance Assurance Framework

Shariah Compliance Assurance Framework (SCAF)

Shariah Committee
Shariah Compliance Assurance Committee (SCAC)

Shariah Audit Risk & Regulation Treasury
Compliance

Best Practices in Islamic Stockbroking Services Undertaken by Participating Organisations
Best Practices for Shariah Investing

41

What is in for Islamic Capital Market Industry?

Strengthen Islamic capital market product and service
offerings

Make Shariah trading more visible and provide a conducive
marketplace for Shariah investing community

Increase in demand for Shariah investments by investors
who seek to enhance their compliance by undertaking
investing process in a full Shariah-compliant manner

Attract domestic, regional and global Islamic and ethical
issuers and investors, and boost cross border activities

Malaysia: THE MARKETPLACE for Islamic-based financial

offerings and Shariah investing 42

PART 4

SUSTAINABLE & RESPONSIBLE INVESTING

Ethical Investment vs Shariah Investment

Ethical Investment Shariah Investment

Screening  Negative screening  Quantitative Assessment:
Methodology  Positive screening  Business activity benchmark
Fund Advisor  Engagement  Financial ratio benchmark
Common Values
 May not always have a formal  Qualitative Assessment
Guideline advisor.
 Shariah advisor advises on quarterly/ semi-
Financial  Steer clear of alcohol, tobacco, annually review, as well as in day-to-day
Inclusion gambling and entertainment fund operation
Non-speculative
 Does not adhere to a fixed set  Steer clear of alcohol, tobacco, gambling and
of guidelines entertainment

 Advocates socially responsible  Guided by Al-Quran and Sunnah
business practice  Maqasid al-Shariah

 Stays away from speculation  Protection of faith
 Protection of life
 Protection of posterity 44
 Protection of property
 Protection of reason

 Advocates bridging of the financial sector
with the real economy through trading,
leasing and equity participation

 Mudharabah & Musharakah

 Stays away from speculation
 Hedging is nonetheless permissible for risk

sharing purposes

ASEAN’s First Globally Benchmarked ESG Index:
Complementing Shariah-compliant Investing

Launch of the FTSE4Good Bursa Malaysia (F4GBM) Index to measure the
performance of companies demonstrating strong ESG practices, to further
strengthen the governance & sustainability framework for Malaysian
equities. The index is aligned with other leading global ESG frameworks
such as Global Reporting Initiatives and the Carbon Disclosure Project.

45

27 out of 42 (64%) of the FTSE4Good Bursa Malaysia
Index Constituents are Shariah-compliant

The 15 Shariah non-compliant companies are due to their nature of business

Note: The constituents list was last updated on 6 Dec 2016 46
* New addition to the Index for Dec 2016 review, with effect from Monday, 19 Dec 2016

# Lafarge Malaysia & Media Prima were excluded in Dec 2016 review due to their deletions from the FTSE Bursa Malaysia EMAS Index

Catalysing Shariah Investing on Bursa Malaysia-i

1. The need for comprehensive support from the industry and stakeholders.
2. Embracement by domestic market will be major catalyst to drive foreign

interest.

47

Thank You

Live Responsibly [email protected]
Invest Responsibly Islamic Capital Market, Bursa Malaysia
Invest Shariah @ICM_Bursa
@ICM_Bursa

http://www.bursamalaysia.com/market/islamic-markets/

DISCLAIMER :
Bursa Malaysia and its Group of Companies (the Company) reserve all proprietary rights to the contents of this presentation. Whilst the Company
endeavours to ensure that the contents in this presentation are accurate, complete or have been obtained from sources believed by the Company
to be accurate and reliable, neither the Company nor the presenter make any warranty, express or implied, nor assume any legal liability or
responsibility for the accuracy, completeness or currency of the contents of this presentation. In no event shall the Company be liable for any
claim, howsoever arising, out of or in relation to this presentation."

© Bursa Malaysia 2013