A revised list of Malaysian equities that qualify for Islamic investment, compiled by the commission, will take effect tomorrow.
It uses a new screening methodology which incorporates quantitative filters such as benchmarks for financial ratios, moving closer to the approach generally used in the Gulf.
The change will help to internationalize Malaysia’s Islamic finance industry, Zainal Izlan Zainal Abidin, executive director of Islamic Capital Markets at the commission, said by email.
“The attraction of Malaysian Islamic funds and equities to other Gulf states, as a proxy for the growing economic importance of Asean, is expected to be accelerated,” he said.
The commission’s methodology had previously included only qualitative screens; for example, it banned companies involved in sectors such as tobacco and alcohol.
Islamic fund managers in Malaysia have six months to dispose of securities that are excluded from the list, which now has a total of 653 syariah-compliant stocks out of 914 listed on the Bursa Malaysia.
The new list will add 16 stocks and remove 158 that were on the previous list, which was issued in May.
Malaysia has the largest base of Islamic mutual funds, with 210 retail and wholesale funds that had RM79.6 billion in assets under management as of December 2012.
These could increasingly be marketed in the Gulf through an existing agreement between the Malaysian Securities Commission and the Dubai Financial Services Authority, Zainal Izlan said.
“Given the greater familiarity, Dubai-based financial institutions could be attracted to market and distribute Malaysia-based Islamic funds in Dubai.”
Malaysia may also benefit from a better consumer perception in the Gulf, since its approach to Islamic finance has been criticized as too liberal, said Monem Salam, president of investment firm Saturna Sdn Bhd in Malaysia.