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Shariah Investing, for a Better Future and More Equitable Wealth Distribution

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Shariah investing is a very popular buzzword and Malaysia is the world’s leader in Islamic finance industry.

Smart Investor spoke to Ruzi Rani Ajith, chief executive officer of CGS-CIMB Securities Sdn Bhd to find out more about Shariah investing and the inaugural CGS-CIMB Regional Shariah Investing Symposium 2022 which was held in Singapore recently.

Themed Sustainability & Shariah: Investing for a Brighter Future, the symposium brings together experts from across Malaysia, Singapore and Indonesia to discuss the latest developments in Islamic Finance and Shariah Investment. Top management from leading Shariah-compliant companies listed on Bursa Malaysia, the Singapore Exchange and the Indonesia Stock Exchange were present to share their future strategies and growth plans post-pandemic.

Smart Investor: Hi Ruzi Rani Ajith, thanks for taking the time to have this interview with Smart Investor. Perhaps we can begin with a brief introduction about yourself?

Ruzi Rani Ajith: Hi, thank you for having me. It is my pleasure to be here with Smart Investor. Sure, my name is Ruzi Rani Ajith. I am the chief executive officer at CGS-CIMB Securities Malaysia and group head of shariah services at CGS-CIMB Securities.

Prior to my appointment, I served as the head of equities in CIMB Investment Bank, where I have worked with the organisation in various capacities over the past 23 years. Before joining CIMB, I was with Affin Investment Bank for three years as a fund manager.

SI: Why do you think Shariah investing is important, and is it only limited to Muslims?

RRA: Shariah investing is not limited the Muslims. Shariah investing is for all. It is another approach to investing where Shariah compliance is to be adhered to. Shariah investing among others avoid prohibitive elements in shariah such as riba (interest), gharar (ambiguity) and maysir (gambling). In its process to uphold Maqasid (objective) Shariah, Shariah investing has always been closely linked to Social Responsible Investment (SRI) and Environmental, Social And Governance (ESG).

Shariah investing is a subset of SRI and also complementary to ESG. Due to its overlap with ESG and SRI, it is becoming increasingly popular and important for investors, with an increase in take-up on Shariah investing.

SI: What are the market trends should investors look out for in the near future?

RRA: The trend is the focus on Shariah and ESG investing. Global investors are increasingly aware of the synergy between ESG investments and Islamic finance. This contributes to the growing demand for Shariah-compliant investments as investors seek greater portfolio diversification and an alternative to investing traditional ESG. Shariah-compliant and ESG investing are complementary investment approaches that have important points in common, such as being a good steward of society and the environment. “According to research by Refintiv, Shariah compliance screening can do much to improve ESG performance. There is a direct correlation between Shariah compliance and higher ESG scores, and combining the two could improve overall risk-adjusted returns”.

We should see an increase in new Shariah or ESG product offerings to cater for various market segments.

Another trend that is taking centre stage is the green and renewable energy space as the world is gearing towards a net zero carbon by 2050. This is where the transition into green and renewable energy comes into play. Hence, funding this transition has created the demand for sustainability and green sukuk which has resulted in exponential growth.

SI: With the rise of inflation and interest rates, what should an investor do?

RRA: Never put all your eggs in one basket. Portfolio diversification can help to balance the risk and reward in your investment portfolio.

Also, investors can consider investing in ESG and Shariah-compliant products to reduce the risk in an uncertain market.  To also take into consideration to invest in defensive and high-yield stocks.

SI: Tell me more about CGS-CIMB’s involvement with Shariah investing?

RRA: CGS-CIMB started its Shariah business in Malaysia office where Shariah investing is further enhanced with various innovative products that are in the pipeline and will be launched soon. Confident with the prospect of Shariah businesses, we have also extended our Shariah services to our Singapore and Indonesia offices.

In Malaysia, CGS-CIMB offers a range of Shariah-compliant products and services from Shariah compliant trading accounts; with access to thousands of Shariah-compliant securities, margin facilities. We are the first broker to launch Islamic Cross Border Trading, as well as setting the framework for Islamic Securities Selling and Buying (ISSBNT).

The responses have been very positive. Over the past two years, we have managed to triple the number of Islamic trading accounts. We aim to continue to launch innovative Shariah Compliant products such as Shariah-compliant Discretionary Trading and Shariah-compliant Futures.

We are happy to have Singapore and Indonesia embarking on this journey, launching their first Shariah-compliant products and services at this Shariah Symposium. Moving forward, we will continue to expand our product and services in the region.

SI: Congratulations on the inaugural CGS-CIMB Regional Shariah Investing Symposium 2022 which was recently held, care to share more about this event?

RRA: Thank you.

The CGS-CIMB Regional Shariah Investing Symposium (RSIS) will be organized annually.

The RSIS sets as a platform to bring together exchanges, corporate leaders, industry experts and investors to explore economic and market trends within the Shariah Investment landscape.

RSIS aims to bring awareness and educate investors and public on Shariah investments, especially in Singapore and Indonesia.

The symposium showcases CGS-CIMB’s contribution to Islamic Finance industry in creating awareness on the subjects and its focus on Islamic businesses in the region.

CGS-CIMB’s aspiration is to become the regional leader within the Islamic Broking space. On the long run, this annual symposium is aimed to further provide deep awareness to the growing trend for Islamic Finance and Shariah Investment across the region.

The support from three exchanges namely Bursa Malaysia, Singapore Stock Exchange and Indonesia Exchange shows a positive sign to create awareness of Shariah investment around the region and encourages Shariah investments as a choice and an alternative to conventional investments.

SI: What are some of your plans for the future that you can share with us?

RRA: Our goal is to be a leader in Islamic Finance in countries with CGS-CIMB presence.

We hope to use our experience in Malaysia to lead the Islamic initiatives in countries where CGS-CIMB has a presence starting with Singapore and Indonesia which has the most potential.

In Malaysia, our focus will be on operational efficiency as well as continue to improve our Sariah product offerings. We will be launching two new products namely Shariah Discretionary Trading and the first in the world Shariah-compliant Futures this year.

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