From November 2007, the Hong Kong government has been promoting the special administrative region as a platform for Islamic finance.
Since then, there have been a few major developments — an MoU signed between the Hong Kong Monetary Authority (HKMA) and Dubai International Financial Centre in May 2008; an MoU between HKMA and Bank Negara Malaysia in September 2009. Both MoUs were aimed at fostering cooperation in the development of Shariah compliant financial products and financial infrastructure in the respective jurisdictions.
In addition, there have been a series of Islamic financial investment vehicles developed in Hong Kong since, including Hang Seng Islamic China Index Fund, Commodity Murabahah Deposit, a third party Sukuk to retail customers by HSBC, and the Mayfair Islamic Greater China Fund (MIGC).
In fact, as far back as 2006, Mayfair Pacific believed that there was a rising demand in Islamic products, and understood that most global investors around the world were showing strong interest in tapping into China but did not know how to access the Chinese market. So we launched the innovative first ever MIGC in 2008 and provided opportunities for global investors to invest in Greater China which includes mainland China, Hong Kong and Taiwan.
After launching the MIGC Fund, we have been closely monitoring the development of Islamic finance within the region. We witnessed that after the 2008/09 financial crisis and Lehman Brothers’ bankruptcy, global investors’ risk appetites are much lower. Investors started to seek investments with lower volatility, alternate risk diverse opportunities and with socially responsible investment concepts. One of the alternatives that aptly fits this category is Islamic funds.
With the growing potential of Islamic wealth management in Hong Kong, there are many institutions devoted to providing education and raising the awareness of Islamic finance. The Hong Kong University School of Professional and Continuing Education as well as the Chinese University of Hong Kong have been providing Islamic finance courses to professionals and related topics are covered in some MBA courses. Other professional bodies include Chartered Institute of Management Accountants, Hong Kong Securities Institute and The Hong Kong Institute of Bankers.
Islamic wealth management professionals as well as investors in Hong Kong will be able to equip themselves with a better understanding of the Islamic finance industry.
Investors have gradually become aware of the advantages of investing in Islamic funds, particularly the benefits of the Shariah screening process. Firstly, in the absence of leveraging, Islamic financial products tend to have a lower volatility in general and also they tend to suffer less in market downturns. Secondly, any investment decision into Shariah compliant companies will not only be profit oriented but also be driven by social responsibility.
On the other hand, the Hong Kong government is also working hard to have better Islamic guidelines and impose tax incentives to attract more Islamic banks, financial institutions, legal professionals and expertise to Hong Kong in order to develop Islamic finance further.
Greater China
Investors from Malaysia are expected to expand to the neighborhood including Greater China in the next five to 10 years. Malaysia held Islamic banking assets equaling RM223.70 billion (US$70.60 billion) in 2009 according to PwC, and has the largest Sukuk market in the world with a total of US$17.60 billion.
Islamic finance currently commands approximately 20% of the total banking sector in Malaysia, 70% to 80% of the primary debt capital market, more than 60% of the total outstanding corporate bonds, 88% of the listed stocks and 10% of the asset management industry in Malaysia.
Investors are currently focused on local markets and are expected to expand to the neighborhood including Greater China in the next five to 10 years. Hong Kong, being the best financial hub for China investments, has unquestionably created an excellent platform for wealth managers to extend their China investments for both conventional and Islamic products through Hong Kong. Along the same token, the high liquidity in Hong Kong’s financial market can also attract more funds from Islamic financial institutions.
In China, Islamic wealth management is also growing fast as China has been expanding and developing their business on Islamic related investments. Ningxia’s first Islamic bank has been in operation since the 24th December 2009 and the Economic and Technological Cooperation Office of the People’s Government of Ningxia Hui Autonomous Region appointed Mayfair Pacific as their chief representative on the 15th October 2010 to promote and bring in investments from outside China to their Islamic related investments like halal food, Muslim health products and supplies for Ningxia.
As more countries begin to jump onto the Islamic finance bandwagon, more innovative and dynamic Islamic investment products will be introduced. As long as the Islamic funds industry actively educates investors about the benefits of Islamic investing by providing more training and bringing into more awareness, we shall expect Islamic funds to grow further in size, structure and variety and become one of the favorite asset classes in Hong Kong and China in the near future.
In summary, we continue to see a huge potential for Islamic finance products to develop and grow in Asia particularly in Greater China. As an Islamic industry player, Mayfair Pacific’s vision is to act as a bridge between Greater China and the world to bring investment opportunities from one place to another in an Islamic way.
Christina Tung
Managing director
Mayfair Pacific Financial Group
Email:
[email protected]
Christina Tung has been actively participating in the promotion of Islamic finance and Islamic asset management in Hong Kong, following the setup of the first ever Mayfair Islamic Greater China Segregated Portfolio in 2008.