Launch of FTSE-SGX Asia Shariah 100 Index, 21 February 2006
Congratulatory Remarks by Mr Heng Swee Keat, Managing Director, Monetary Authority of Singapore
1 It is my great pleasure to be here this evening.
2 Singapore is situated at the heart of a very dynamic region, and demand for financial services is growing rapidly. Firms here have been responding to these new demands, and have grown in size and sophistication. This evening's launch of the FTSE-SGX Asia Shariah 100 Index marks an important innovation in the financial sector in Singapore. The FTSE-SGX Asia Shariah 100 Index will be the first pan-Asian Islamic equity index to be introduced in Asia. More importantly, the Singapore Exchange informs me that this is just the beginning. The Exchange is working on introducing a series of Shari'ah-compliant indices covering a variety of markets, following today's successful launch of the Asian Index.
3 May I congratulate the Singapore Exchange, FTSE and Yasaar Consultants for embarking on this venture and seeing it to its successful launch today. This ground breaking project would not have taken off without your commitment and expertise.
4 Islamic finance has grown rapidly in the past few years and I believe, will continue to grow. In particular, the strong growth of the economies in the Middle East has generated substantial demand for Shari'ah-compliant products. Financial institutions, in response, have been creating a wide range of such products.
5 Asia, as one of the fastest growing region in the world, provides significant opportunities for investment. Investors in the Middle East are also showing increasing interest to diversify and to tap the growth opportunities in Asia. The potential for matching the pools of investment funds and economic opportunities between the Middle East and Asia is tremendous.
6 Singapore, as an international financial centre has always strived for product innovation. Our financial institutions here are well positioned to leverage on the expertise in conventional products to offer Shari'ah-compliant solutions for Islamic investors. I am confident that financial institutions here will continue to add Islamic financial products and services to the suite of conventional financial products that they already offer.
7 As a regulator, MAS will continue to facilitate the growth of Islamic finance. We have undertaken a review of our regulatory and tax environment to ensure a level playing field for Islamic financial products. The first set of changes has been made. In the Budget announcement last Friday, the Minister for Finance has made clear that the overall tax policy in the treatment of Islamic contracts is to align the tax treatment for Islamic financial products with the treatment of conventional financing contracts that they are economically equivalent to, and has specifically extended tax benefits to Murabaha, Mudarabah, Ijara Wa Igtina and Sukuk. We hope that this will give the industry maximum flexibility for innovation.
8 In Singapore, fund managers have been establishing Shari'ah-compliant property funds in partnership with Middle Eastern financial institutions. There are currently S$2 billion Shari'ah-compliant funds managed out of Singapore. Last year, we also saw the first Murabaha financing facility offered in Singapore, as well as the set up of a re-takaful insurer to cater to this growing market.
9 The launch of FTSE-SGX Asia Shariah 100 Index is thus most timely. The index can serve as benchmark for Shari'ah-compliant funds investing in Asian equities, and pave the way for creation of other index-linked products. I understand that the Singapore Exchange is working to create an Exchange Traded Fund off the index. This would facilitate the growth of Shari'ah-compliant funds seeking Asian exposures. I am very much looking forward to the launch of this first Shari'ah compliant Exchange Traded Fund in the near future.
10 This project is a significant milestone in the development of Islamic finance in Singapore. May I commend the three partners in conceiving and launching this innovation. It is an example of an excellent partnership, bringing together the Singapore Exchange's commitment to grow its product suite, the FTSE Group's expertise in creating international index solutions, and Yasaar Research's capabilities in Shari'ah-compliant financial products.
11 On this note, let me once again congratulate the Singapore Exchange, FTSE Group and Yasaar Research on the launch of the FTSE-SGX Asia Shariah 100 Index. I am optimistic that the Index will catalyse many more innovations in the coming months.
12 Thank you.