KUALA LUMPUR, Aug 21 (Reuters) - Malaysian lender AmInvestment Bank launched its Islamic stockbroking business on Thursday, offering investors a channel to invest in stocks that comply with religious law requirements.
Investors can also trade sharia-compliant stocks through conventional brokers but their funds would be placed together with conventional funds where surplus amounts are placed in interest-bearing accounts.
Islamic stockbrokers, in contrast, separate investors’ funds in special accounts which are then invested only in assets that meet the sharia’s standards.
Stocks have to avoid activities such as interest-based lending, conventional insurance, gaming and tobacco to be classified as sharia-compliant.
Just over half of Malaysia’s population of 27 million are Muslims. The country aspires to become a global hub for Islamic finance, and already has the world’s largest sharia-compliant debt market.
About 85 percent of securities, or 843 stocks, listed on Bursa Malaysia (BMYS.KL) are sharia-compliant. They include top mobile phone company TM International TMIT.KL, food manufacturer Nestle (Malaysia) Bhd (NESM.KL), energy firm Esso Malaysia Bhd ESSO.KL and builder Gamuda Bhd (GAMU.KL).
AmInvestment, part of AMMB Holdings (AMMB.KL), Malaysia’s sixth largest lender in terms of market capitalisation, said the domestic market would be the initial focus of its Islamic stockbroking business.
“At this point of time we are tailoring it for the general Malaysian and those who are a bit more liberal,” Shaharuddin Hassan, AmInvestment Bank operations director told reporters.
Malaysia is generally viewed as adopting a more liberal stance as to what qualifies as an Islamic product. Some Gulf investors say some Malaysian products are not fully sharia-compliant.
Shaharuddin said the bank aimed to make a profit of 1 million ringgit ($300,000) from its Islamic stockbroking business in its first year of operations.
AmInvestment is the second Malaysian lender after BIMB Securities, a subsidiary of BIMB Holdings (BIMB.KL), to offer Islamic stockbroking services.
Shaharuddin said two or three other local investment banks were expected to offer sharia-compliant stockbroking services, driven by growing demand for Islamic products. ($1=3.340 Malaysian Ringgit) (Reporting by Liau Y-Sing; Editing by Lincoln Feast)