24 January 2010 |   By : Dato Dr Nik Ramlah Mahmood, Managing Director, Securities Commission Malaysia
Special Remarks 
 by YBhg Dato Dr Nik Ramlah Nik Mahmood 
 Managing Director, Securities Commission Malaysia  
 24 January 2010 


His Excellency, Dato’ Syed Sultan Idris, the Malaysian Ambassador to Bahrain; 
Mr Rahman Al Baker, Executive Director, Central Bank of Bahrain; 
Dato’ Razif Abdul Kadir, Director General, Bank Negara Malaysia; 
Dato’ Yusli Yusoff, CEO, Bursa Malaysia; 
Mr Arshad Khan, Board Director of the Bahrain Financial Exchange; 
Distinguished guests, 
Members of the media, 
Ladies and gentlemen
Assalamualaikum warahmatullahi wabarakatu and a very good morning to all.


  1. It is indeed a great honour for me to be here in Bahrain, to witness the signing of the Memorandum of Understanding between the Bahrain Financial Exchange and Bursa Malaysia. 
  2. Securities Commission Malaysia welcomes the signing of this MOU as it significant step not only for both exchanges but also for both our countries. It will be a meaningful addition to the existing list of cooperative activities between our two countries and will deepen and strengthen the ties between two of the world’s most important Islamic financial centres. Bahrain’s presence in Malaysia is felt not only through the activities of your financial institutions in Malaysia but also through the active participation and contribution of some of your eminent shariah scholars in the activities of Malaysian companies and institutions. On our part we hope that the presence of our banks, public listed companies, the participation of our shariah scholars as well as our participation in AAOIFI and International Islamic Financial Market will contribute towards enriching our bilateral ties and towards strengthening Islamic finance for the benefit of the Ummah
  3. As we know, Islamic finance to succeed as a viable alternative to conventional finance, increased cooperation and linkages between various international markets is critical to building a thriving and vibrant global network of Islamic financial markets. This will also create opportunities to stimulate cross-border investment flows which often act as a catalyst for development. 

Cross Border Capital Flow
  1. Capital, particularly FDI and portfolio flows, is expected to flow into emerging economies in 2010, with Asia expected to be the main recipient. High-surplus regions such as the GCC, Middle East and East Asia are expected to spend more, especially in industrial and infrastructure developments. And this is indeed a great opportunity for equity and other participatory structures such as venture capital and private equities to thrive. 
  2. Hence in Malaysia, in addition to having the world’s largest sukuk market, we have a comprehensive Islamic capital market and offer many incentives for the development of market itself. Currently 88% of the stocks listed on Bursa Malaysia are shariah-compliant having total market capitalization of RM637.9 b (USD187.6b) or 63.8% of total market-capitalisation. As a result of which it has been possible to have an end-to-end Shariah compliant ETF, designed to provide returns that closely correspond to the performance of a benchmark index – in this case, Dow Jones Islamic Market Malaysia Titans 25 Index. There are currently 145 Islamic unit trust funds managing over RM21.69b (USD6.40b) representing about 12% of total industry. Apart from equities, there are three Shariah Compliant REITS not just underlined upon real-estates but also an oil palm plantation. This diversity of assets contributes to an extend towards insulating Islamic finance from potential risks resulting from excess leverage and speculative financial activities. 
  3. Indeed, the equity market is an area where there are strong opportunities, enabling issuers to meet their funding need through the Islamic equity market, into new markets. Last year we saw the listing of several China-based companies on Bursa Malaysia. These companies have applied for and received shariah-compliant status at IPO. Individual and institutional investors seeking shariah-compliant investments can therefore access the companies through investing in Bursa Malaysia. 
  4. The advantage of the modern financial world is that it makes markets more efficient and deepens liquidity and, consistent with this, facilitate the management of risks in markets. Facilitating such needs can be made more efficient through a regional or common market collaboration that would offer a more effective and facilitative platform for investors. 
  5. The current trend across markets thus is to enable linkage between participating markets via a single access point. This is indeed good as by such linkages along with a strong regulatory framework governing transparency for trading and fund management, it can help to cushion the participating markets from shocks that could affect the global industry. By linking markets we are able to reduce the fragmentation between pools of Islamic liquidity and build greater connectivity between our economies and markets to promote the growth of Islamic financial markets around the world. Markets and innovation cannot thrive in isolation. 

Facilitating Innovations
  1. The signing of the Memorandum of Understanding between the Bahrain Financial Exchange and Bursa Malaysia for purposes of facilitating the Bursa Suq al Sila’ platform is another good move towards such an agenda. 
  2. The establishment of Suq al Sila’ is not just intended to meet the requirements of the Shariah but also modern market requirements such higher governance and transparency standards. As such, Suq al Sila’ not only is expected to enable efficient intermediation between the surplus and deficit institutions across multiple markets, but also assures clearing and settlement, transparency of transactions, and strict compliance to Shariah requirements. 

  1. The current challenges posed by an unstable global financial system provide an opportunity for Islamic finance experts to consider the opportunities to promote the virtues of a shariah-compliant financial system. This must go hand-in-hand with continued advancement in knowledge and innovation. Islamic investors also need to consider diversification strategies and to reduce their reliance on replicated structures of contracts. Islamic banks and other financial intermediaries do need to expand their capabilities in diversifying the risks on their balance sheets and to manage their liquidity. Suq al Sila’ indeed would add breadth to Islamic capital markets and provide the impetus to grow a comprehensive and more robust Islamic financial system. 
  2. Overall, we must remain mindful that the key to sustainability lies in innovation. To add value, Islamic finance must provide form with substance, and not form over substance. So we must work together to chart the future landscape of Islamic finance so that it delivers an “inclusive prosperity” that meets not just the pursuit of profit for individuals but the equitable sharing of wealth for society. 
  3. Thank you and ma ‘a salaamah.

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