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HSBC Amanah to expand presence, create Islamic ETFs

Islamic unit optimistic about Q4, 2011 pipeline.

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October 15, 2010 8:48 by



The Islamic unit of HSBC plans to grow internationally through the launch of the industry’s first Islamic exchange-traded fund (ETF) and by a further expansion into Bangladesh within the next six months.

In an interview, the unit’s deputy chief executive said its first Islamic ETF is expected to launch in the Gulf in the fourth quarter to address a growing demand among customers seeking exposure to the Middle East.

“Institutional investors recognize that the Middle East as an emerging market is something they’d like exposure to,” Razi Fakih told Reuters on Thursday. “ETFs allow them a greater access to this market.”

Fakih said he expects ETFs will form up to 10 percent of the Islamic funds market in the next five years.

While Islamic funds have struggled in recent years, experts say the industry will see increasing demand as more diverse products and asset classes are offered to Muslim investors.

But Fakih said the industry is positioned for strong growth particularly in the Middle East and Asia. He also said Turkey, which had its first sukuk issuance by a local Islamic bank, will become an increasingly important market.

After a slowdown in Islamic bond, or sukuk, issuance in the first nine months of the year, Fakih said Islamic debt markets are starting to reopen, boding well for HSBC Amanah’s outlook.

“Based on our pipeline of transactions, we expect to end the year positively,” he said.

BIGGER PRESENCE

As the global market opens up, Fakih said he saw increased opportunity for expansion in Bangladesh, where HSBC Amanah already has a presence but plans to significantly widen the scope of its services.

“Bangladesh is a market that HSBC continues to look at … Bangladesh is a much bigger presence than we currently have in southeast Asia,” he said.

The company is also engaged in discussions with regulators from other countries that are considering offering Islamic finance. “The countries that don’t have the regulatory structures to offer Islamic finance today, will be the markets of tomorrow,” he said. “We expect more markets to open up.”

Countries from Australia to France have started examining their regulatory structures to see how to accommodate Islamic finance. To address expected global growth, HSBC Amanah is looking to bolster its talent pool, Fakih said.

HSBC Amanah will announce five new hires by the end of the year across its debt capital markets, retail and corporate businesses, he said, adding the company had just appointed Sirajulhaq Yasini as global head of sharia as well as Yakub Bobat as global head of Amanah’s commercial banking business.

“We plan to strengthen the team further as the business is growing,” he said. “People is something you will see us focusing on a lot.”

(Editing by David Holmes)



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