|
Singapore: Malaysia, Asia's biggest Islamic finance market, can expect growing competition from Singapore and Hong Kong, which are raising their game to tap Middle East funds keen on investing in the region's economies.
Malaysia has a stranglehold on the global market for Islamic bonds - two-thirds of such bonds, called sukuk, were issued in the Southeast Asian state last year - and it has built up expertise in Islamic fund management and insurance.
But latecomers Singapore and Hong Kong, leading Asian centres for conventional private banking and fund management, are adapting their financial systems with a view to getting a slice of the $1.3 trillion in global Islamic finance assets.
Hong Kong, for example, is considering scrapping a stamp duty on Islamic finance structures to avoid double taxation. Singapore is soon to launch new guidelines for sukuk.
Both need to build up expertise in a complex area.
"Singapore and Hong Kong are established financial centres so their clearest path to a prominent position in Islamic finance is to encourage a critical mass of Islamic finance experts," said Hooman Sabeti, an Islamic law specialist at law firm Allen & Overy.
Singapore and Hong Kong are unlikely to supplant Malaysia as the leading centre in Asia, Sabeti said, because they lack a large, natural domestic market for Islamic products.
But they could become increasingly active in selling Islamic products to private banking clients and fund investors.
Indonesian, Bruneian and Malaysian investors who already own conventional financial assets in Singapore would be obvious targets.
A Merrill Lynch/Capgemini study last year showed that 19,000 individuals of Indonesian origin resident in Singapore held around $93 billion in financial assets.
Hong Kong, for its part, could provide a gateway for new investors interested in mainland China, constructing sharia-compliant products with underlying Chinese assets.
Incentives
Hong Kong and Singapore are not Islamic states and Muslims in each city are in the minority. But that does not preclude the emergence of an Islamic finance sector, as London is showing.
With their robust banking and legal systems, Hong Kong and Singapore provide ripe environments for the development of products that comply with sharia.
Singapore is offering incentives, while Hong Kong is amending laws to draw business and has proposed an Islamic bond issue by the city's airport authority.
|
