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(KUALA LUMPUR) Malaysia will introduce a trading platform that will enable banks and companies to buy and sell commodities used to back Islamic loans, seeking to widen the country's appeal to investors seeking Syariah-compliant assets.
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| Different scope: The online trading system won't compete with palm oil futures trading in Malaysia as it will only involve spot transactions, or trades for immediate delivery, which have not previously been conducted in the country |
The so-called Commodity Murabahah House, to be managed by a unit of Bursa Malaysia Bhd, will begin operations next month initially trading only palm oil, Yusli Yusoff, chief executive officer of the stock exchange, said. Malaysia has expanded its Islamic finance industry by easing foreign ownership rules and introducing new products to tap funds from the Middle East. The Islamic financial market may expand to US$2.8 trillion by 2015, according to an estimate from the Kuala Lumpur-based Islamic Financial Services Board.
'It'll make it easier for us to issue Murabahah because it will be the supply platform for palm oil' instead of going to traders and producers to buy the assets, said Angus Salim, head of treasury and capital markets at Cagamas Bhd, Malaysia's biggest seller of commodity Murabahah.
A Murabahah contract is a sale and deferred-payment accord based on an asset, usually a commodity, in which the cost and profit margin are pre-agreed to comply with Syariah principles.
The online trading platform will guarantee not just that the product is Syariah-compliant, but that it will actually be delivered, Mr Yusli said.
The system won't compete with palm oil futures trading in Malaysia as it will only involve spot transactions, or trades for immediate delivery, which have not previously been conducted in the country, said Raja Teh Maimunah Raja Abdul Aziz, global head of Islamic markets at Bursa Malaysia.
Participants - financial institutions, commodity producers and traders - can trade commodities, certificates representing ownership of commodities, and contracts that specify different assets. Sellers must own the physical commodity before dealing.
Commodity Murabahah House will operate from 10.30am to 6.00pm local time on Mondays to Thursdays. On Fridays, it will trade from 10.30am to 12.30pm and from 2.30 to 6.00pm, the exchange said in a statement.
Plantation owners including Genting Plantations Bhd, IOI Corp and Sime Darby Bhd, and the Islamic banking units of Citibank NA, Malayan Banking Bhd, HSBC Holdings plc and Standard Chartered plc, are among the companies who have agreed to trade palm oil through the house. -- Bloomberg
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