Dow Jones Indexes is in talks with the Securities Commission (SC) and Bursa Malaysia Bhd to set up an Islamic-based exchange-traded fund (ETF) in Malaysia for the Asia-Pacific region.
Dow Jones Indexes Islamic group global director A Rushdi Siddiqui said the talks were in the preliminary stages but said the SC was very keen to establish the ETF.
“We are talking to the authorities here about ETF for the Asia-Pacific. It is still in the early days, but I think we have started something that is beneficial to the Islamic finance space,” he told The Edge FinancialDaily in an interview recently.
An ETF is a type of investment that attempts to reflect the performance of a stock market index. An ETF’s value comes directly from the assets that it represents.
He said the ETF could be hard currency denominated, but discussions were still underway to determine the best course of action for implementing ETF in the region.
“It is still at the early days, especially if it is going to be a hard currency-denominated ETF. They (Bursa and SC) want to do it right instead of doing it fast,” he said.
Rushdi said SC chairperson Datuk Zarinah Anwar had expressed optimism on the establishment of the ETF, as it was beneficial for the further development of the Islamic financial market in Malaysia.
“In the West, it has a major attraction because it is used by major players to participate in the market place, as the vehicle is very liquid.
“Some institutions use that, some institutions use hedging mechanisms, others use it as a buying-hold strategy, while others use it as a trading/speculating platform,” he said.
On the global front, Rushdi said Dow Jones was planning on introducing real estate investment trusts (REITS) and commodities to its Islamic Indexes.
“So you are looking at REITS, you are looking at commodities… the issue is working with scholars to establish screens, different screens for different asset classes, but the development of the indexes is still in its the early days.