'Shariah Index'New Stock exchange Opportunities for expansion of AEC
By : Ekkarat Mukem
Alami news : Properly investing the stock market according to Shariah principles in Europe, in the Middle East, or even in Asian countries that has a great number of Muslims has been continued for a long time and well accepted from investors.
In part of Thailand, the stock exchange of Thailand or Securities and Exchange Commission (SEC) shakes hands with FTSE group Asia Pacific Company which is specialized in the management of stock indexes and officially launched on 25 April 2009.
Five years have passed, the Alami magazine will take the readers to know about the Sharias Index (Shariah Index) through the view of Mrs Kesara Manchusree, Vice President of Stock Exchange in Thailand.
The background of “Shariah Index” in Thailand
Kesara: Currently, the stock market has registered in the stock exchange and has traded through it more than 500 companies. Mostly, it is registered in accordance with the regulatory investment under Shariah, and investors can choose to invest. However, in order to make sure that it is halal, the experts in the field of religion or it can be called as “Yasa” are guaranteed it. In this case, Muslim investors do not have to be worried that it is forbidden, and they can have a screen tool and can find out that if they are trading or investing in the stock market, they will know the share what they will get after investing.
After we opened the Shariah Index 5 years ago, we collaborated with FTSE Company and went to the Road Show in the Middle East to promote that our country has invested in Shariah Index because we want to reassure the Muslim investors in foreign country. So, the Road Show has received much attention, and we went with Standard Charter Bank because this bank already has a market in the Middle East.
But after a while, it shows that the global economy both in the US and in Dubai has slow down. As a result, the operation is not continuous as it should.
“In fact, we can run the Shariah Index alone. However, we join with FTSE Company for the universal because they have branches and are distributed throughout the world. It would be beneficial to the Company’s registration with Thailand”.
5 years of starting, what has it been developed?
Kesara: for the development, we feel that it did not reach our goal as we thought, and we can see it by two ways. All of them are references of a financial tool and references of the bond index. Currently, Thailand has only one fund which is MFC that has 2 funds including long term funds (LTF) and general funds (ETF) with assets of about 500 millions. However, it found that the rate of return is quite good on the market index.
Although there are many stocks in the stock market, but it has a screening market in Shariah market’s group to let the investors see which will report the results on the screen. It will show every 15 seconds during a working time. So, we can see that wherever SET index goes, the Shariah index will also follow.
“Today, there are more than 500 stocks in the stock market, and we separate out which basket is for Shariah that has been certified as a halal investment. However, we do not separate the board, and stock exchange in Malaysia has nearly registered 1,000 shares which are general shares. They are filtered out by the system and the Shariah Index, and it does not separate the basket too.
How to attract people to invest in the market
Kesara: Firstly, we promoted in the Middle East, and currently, we spread to Malaysia because we are going to build an ASEAN Linkage. It is a way to open doors neighbors in trading, especially Malaysian market. We have a good relationship in marketing.
“In the future, if we open a market in the Middle East, we can form a group to sell to the investors in the Middle East, but this plan will take few times to go”.
However, from the beginning, it is a kind of market integration or it can be called as an ASEAN linkage in 3 countries including Thailand, Malaysia, and Singapore. Nowadays, we traded through the computer. However, for the long run, it will run by FTSE Company, and we believe that when ASEAN linkage is born, Shariah index will also appear.
“The concentration of the share in Shariah Index, even though it has approved by “Yasa”, but we have to check it whether it is traded in the market or not or if the stock is very small that cannot be sold. It means that it must have a sufficient liquidity. Currently, there are 81 stocks in the stock exchange in Thailand from the stock market or more than 500 of it. These shares will be a shariah about 20% of the market value of 13 billion Bath”.
In part of market value for Shariah Index in the World market, we do not collect it, but at the end of year 2012, Islamic Bonds in the world market is estimated approximately 2.4 billion dollars.
How is Thailand exchange policy on Shariah market?
Kesara: in the past, we made several fields, and last year, we received the Road Show in foreign country. However, for this year, we come to concentrate on the market near our home, such as China, Malaysia, and the Middle East market. We will bring a company that already registered to have a meeting with businessman, and Commercial banks which are not defined as any institution will be screened the Shariah Index that has a good liquidity in order to meet the customers aboard.
“The stock market attempts to be a mediate person because this way can be developed the market by cooperating with FTSE Company. However, it is true that there are few markets in the country because we do not have a very clear Shariah Index, and we expect that it needs sometimes to take it. But, we will go to the customers to promote and let them know that we also have the Shariah Index”.
Why Muslim investment market has not been widespread?
Kesara: we are a slow running because we have a problem of the bond, and it must be improved. We also have a law problem about debt and collecting taxes, such as the word “interest” is not put in the law. It will take time to modify it, and it has been completed last year. However, it has been growing.
“In the past, the Islamic bank in Thailand is a place to start Islamic Bonds or bond debt to navigate other institutions. It can be used in the future, but it is not successful until today”.
How is the ASEAN market index gathered?
Kesara: Nowadays, we have cooperated to the ASEAN stock exchange or ASEAN linkage. It is a project that has cooperation between stock exchanges in 6 ASEAN countries in 7 markets, such as Thailand, Malaysia, Philippine, Singapore, Indonesia, and Vietnam (has 2 markets) that want to develop an electronic system to connect the trading between the stock exchange that are participated in the project in order to facilitate investors in trading across the country.
Last year, we started by using a computer system and connected with 3 markets including Thailand, Singapore, and Malaysia to facilitate the investors across border investment in the ASEAN countries. However, in part of Indonesia, we do not make a decision yet, and we will see how is going on”.
How is the opportunity for Shariah index expansion after the ASEAN community?
Kesara: for the ssessment of the cooperation in 3 countries along with the pair of Shariah market, we expect that it must spend time around 3-5 years, but we think that the ASEAN market is very interesting, and today, we are developed and selected the stocks. The star index is about 30 stocks in each country. Totally, it is approximately 180 shares of each market from 6 countries in 7 markets in order to be a star of each market.
However, in each market, it already has a Shariah index, especially in ASEAN regions. It is about 600 million people, and this number is included 300 of Muslim. However, in the future, we expect that we will reach our goal.
Criteria for business operation and for the financial structure which must not be invested in the transaction as follow: