Regulators urged to create supportive environment for Islamic finance

Bank Islam Investment Management head of investment Abdul Razak Salimin said the stock market was driven by liquidity rather than by the real economy. ― Picture by Hari Anggara
Bank Islam Investment Management head of investment Abdul Razak Salimin said the stock market was driven by liquidity rather than by the real economy. ― Picture by Hari Anggara

KUALA LUMPUR, Oct 22 — Regulators need to create a supportive environment for the Islamic finance industry to boost the industry further, a forum was told today.

Indonesia’s Badan Pengelola Keuangan Haji (BPKH) executive board member for foreign investment and international relations, Hurriyah El Islamy, said the Islamic finance industry should make it less complicated for the people to transact using the Islamic platform.

“(This will help) the people to be at ease. Just to share one incident: when we were offering to come up with a sukuk structure for which a company would have better financial gains, the company chose to take conventional loans for the mere reason that the structure is too complicated,” she said during a virtual panel discussion moderated by Lembaga Tabung Haji chief investment officer Mohamad Damshal Awang Damit.

The panel discussion was held during the Global Islamic Finance Forum 2020 organised by Bloomberg today. BPKH is an institution that manages hajj finance in Indonesia.

Meanwhile, Bank Islam Investment Management head of investment Abdul Razak Salimin said the stock market was driven by liquidity rather than by the real economy.

The surge in the stock market was driven by ample liquidity, especially when the blanket loan moratorium was extended to Malaysians to cushion the impact of the Covid-19 pandemic earlier this year, he noted.

Abdul Razak said that at the start of the outbreak in March this year, the stock market had plunged nearly 30 per cent for Malaysia and more than 30 per cent for the global stock market but it quickly recovered as players tended to look beyond six months.

He noted that the sukuk and bond markets had recovered as well, despite a weak real economy.

“There are multiple reasons why the stock market keeps on going up regardless of what is happening in the real economy. The biggest of them is abundant liquidity in the market.

“For Malaysia, we have been blessed with a loan moratorium from April until September. Where does the money go? They go everywhere but one of them is the stock market,” he said.

Hong Leong Islamic Asset Management chief executive officer Noor Aini Shaik Awab stressed that investors’ education was important to prevent the investors from making wrong decisions when investing, especially with the transformation of digitalisation and easy access to accounts for investment purposes.

“If investors’ education is not emphasised, investors would tend to think that they now have liquidity and they just put it in the stock market, without looking at the fundamentals of the companies and the status of the economy at this moment,” she added.

Noor Aini said young investors had more courage to venture into the stock market, whether in Malaysia or overseas.

“These are areas where we, fund managers, have concerns. And furthermore, I think (with) digitalisation, more millennials are using their e-wallets to go for investments.

“Based on that, the question being asked now is ‘Is the increased performance of the stock market a true economic performance or is it because liquidity is now in surplus in the market and investors or the mass market don’t know where to invest?’ It is easy to go to any stockbroking house and decide what they want to do,” she added. — Bernama

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