Shariah investments bullish

JEDDAH — Shariah investing is forecast to grow very rapidly, following the long-term trends of emerging markets, according to Dr Mark Mobius, Executive Chairman of Templeton Emerging Markets Group. Comparing the performance of emerging markets as a whole and Shariah investments in particular against global performance, Dr Mobius found that emerging markets outperformed US and world markets in 17 out of the last 28 one-year periods. “MSCI World Islamic Index has been running the same way as the general emerging markets index, slightly underperforming, but both have outperformed the world index,” he added. Looking at individual countries, he cited Islamic stocks in Indonesia, Malaysia and Turkey doing particularly well. Trends in GDP growth and foreign reserves show emerging markets to be in better health than developed markets. Exports for emerging markets have grown from 20 percent of world exports to 35 percent and continue to climb. “40 percent of world GDP is in emerging markets, and I can see the day when it will pass 50 percent,” Dr Mobius predicted. Muslim majority countries in emerging markets are riding along this upward trend, with GDP growth currently at 8 percent, up from 4 percent in 1987. The recent dip in performance for emerging markets where it has underperformed against the US and the world, has only reinforced Dr Mobius’ conviction in his analysis. “For the last three years, people have been underweight in emerging markets, which to me is very good news, because once they change their minds, there will be a big rush in the other direction.” “A lot people still forget that emerging markets are still growing in GDP terms, much greater than developed markets,” he said. “This year, our growth forecast is 1.6 percent for developed markets and 3.7 percent for emerging markets. If you look at India and China they’re growing at 6-7 percent. This is tremendous growth.” This is good news for Malaysia as Dr Mobius sees this growth filtering down to Southeast Asia. Despite a recent dip in Malaysia’s foreign reserves, GDP growth and trade surplus, Dr Mobius was adamant that Malaysia’s economic markers were at a healthy level. “GDP growth has been averaging about 5 percent since 1996, and we’re looking at 4 percent this year, a little bit less than last year but still very good growth. The Ringgit is undervalued by 24 percent but has recently recovered a little. And not many countries can boast of Malaysia’s trade surplus figures.” Palm oil prices are now recovering from a dip and Dr Mobius predicted it will continue to climb. “The use of palm oil globally is not declining, it’s continuing to go up because China and India need more consumer goods.” The Islamic financial industry needs to start seeing fintech as a solution and embrace it, rather than seeing it as a problematic threat. That was the clear message delivered by representatives of technology and financial firms at a wide-ranging panel discussion on fintech at the Global Islamic Finance Forum 5.0 The moderator Dr Imran K. Lum, Associate Director of Islamic Capital Market of the National Australia Bank, said fintech startups have recently quadrupled, growing from just over $3 billion in 2013 to over $12 billion in 2014, with crowdfunding set to surpass venture capital this year. — SG “Embrace fintech as the new normal,” said Mohammad Ridzuan Abdul Aziz, CEO, RHT Compliance Solutions. “Make fintech the new normal for Islamic banks. The first thing is we need to trust the fintech community.”