| KUALA LUMPUR, April 8
KUALA LUMPUR, April 8 I-VCAP Management,
Malaysia's only asset manager offering Islamic exchange-traded
funds, will this year launch its first product that includes
foreign equities to attract new investors.
The new Islamic ETF will be pegged to a regional index and
serve investors looking for a more convenient and affordable way
into sharia-compliant stocks in the Association of Southeast
Asian Nations, i-VCAP said.
Many investors still shy from ETFs because they prefer to
invest in local bourses on their own, the company's chief
executive officer Mahdzir Othman told Reuters.
"It's still a challenge typically with Asian investors -
they have a stock-picker mentality and like to do it
themselves," he said.
The firm's next offering will follow last month's listing in
Malaysia of i-VCAP's MyETF MSCI Malaysia Islamic Dividend ETF.
"We have a few lined up, at least another one this year. We
need to keep the momentum going and can't afford to let it die
down, or else we'll have to do it all over again like what we
experienced recently," Othman said.
The March ETF launch saw retail investors subscribe for 4.5
million units and 1.6 million units bought by institutions, much
lower than the firm's total target of 15 to 20 million units.
Othman said his firm had only a short window of time to
promote that ETF, after obtaining approval from regulators took
over a year.
Malaysia's stock exchange currently has six listed ETFs, of
which only the two offered by i-VCAP Management are
sharia-compliant. Only two of the six, both offered by CIMB
Group Holdings Bhd, offer exposure to stocks outside
"Six is still very low - you may want to have 10 to 20 so
investors can pick and choose for their portfolios," said
Othman, adding that a third of market volume in the United
States was driven by ETFs while Singapore had 96 of them listed
on its stock exchange.
"Over there, the regulators make easier access for issuers
to come to the market, in terms of the cost and approval
On the task of educating investors on the benefits of ETFs,
Othman said, "the level of understanding has increased and we do
get queries from the public, but there's still a lot of work to
be done to translate that into actual investment."
In particular, i-VCap wants more retail investment in ETFs,
to improve liquidity. Individual buyers usually buy 1,000-2,000
units, while institutional investors typically enter with lots
of half a million.
The company has submitted a proposal to regulators for
retail subscribers to buy into its next ETF through an issuing
house, which would allow sign-ups online and on ATM machines.
"That's one way for us to get a wider reach and better
subscriptions," said Othman.
The firm issued 840 million units in January 2008 for the
MyETF Dow Jones Islamic Market Titans 25, the first
Islamic ETF in Asia. It was sold at a 5 percent discount to its
net asset value and was supported by seven government-linked
I-VCap is a subsidiary of Valuecap Sdn Bhd, which is owned
equally by Malaysia's state investor Khazanah,
Permodalan Nasional Bhd and civil service pension fund Kumpulan
Wang Persaraan (KWAP).
(Editing by Andrew Torchia)