Islamic Capital Market Analysis

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In an Islamic capital market (ICM) market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam. Here, there is assertion of religious law so that the market is free from activities prohibited by Islam such as usury (riba), gambling (maisir) and ambiguity (gharar). The ICM is a component of the overall capital market in Malaysia. It plays an important role in generating economic growth for the country. The ICM functions as a parallel market to the conventional capital market, and plays a complementary role in the Islamic banking system in broadening and deepening the Islamic financial markets in Malaysia. The Shariah Advisory Council (SAC) was established in May 1996 to advise the…show more content…
Examples of products are Shariah-compliant Securities, Sukuk (Islamic Bond), Islamic unit trusts, Shariahindices, Warrants/Call warrants and Crude Palm Oil futures contract.
Taking cognizance of the need of Muslim investors to trade and invest in the stock market, Islamic stockbroking services began to emerge in 1994 with the setting up of a full-fledged Islamic stockbroking company by the first Islamic bank in the country. In 1998 a second full-fledged Islamic stockbroking company was established. In addition to these two stockbroking companies, other conventional stockbrokers have indicated their interest in this specialised business.
As of today, three Islamic windows are operating side-by-side with their conventional stockbroking services. In fulfilling the specific needs of private investors, there are also asset management companies that manage funds in accordance to Syariah principles. Although this activity is fairly new compared to Islamic unit trusts, the interest among high net worth Muslim investors to engage professional managers to invest their funds has been increasing gradually. This is evident with the existence of few asset managers that are managing individual funds in accordance to Syariah
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Islamic capital market in Malaysia can be divided into the Islamic equity, sukuk and also the Islamic mutual or unit trust fund market. The Islamic Capital Market (ICM) refers to the market where activities are carried out in ways which does not conflict with the principles of Islam. The ICM represents an assertion of religious law in capital market transactions where the market is free from prohibited activities and elements such as riba (usury), maisir (gambling) and gharar (ambiguity). The table below shows some other differences between Islamic and conventional capital markets.
Islamic capital markets Conventional capital market
Limited to sectors not prohibited/included in negative lists of sharia investment and not on the basis of debt (debt-bearing investment) Free to choose either the debt-bearing investment or the profit-bearing investment across sectors
Prohibiting various forms of interest, speculation, and gambling Allowing speculation and gambling which in turn will lead to uncontrolled market fluctuations
Based on sharia principles that encourage the application of profit-loss sharing partnership schemes Based on the principle of

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