Analysis and Valuations of Equities
(FIN347)
HALAL INVESTMENT IN MALAYSIA
Group : JBA1144G
Prepared for :
SIR HUSNIZAM BIN HOSIN
Prepared by :
NAME
STUDENT ID
MUHD MUQHARABBIN BIN KAMARULBARIN
2022454508
NEILY EIZZA ARISSA BINTI FIRDAUS EFFENDY
2022448938
MAISARAH BINTI MOHAMAD
2022837524
NURNABILLA BINTI ZULKIFLEE
2022837188
Meet Our
Teams
MUQHARABBIN
MAISARAH
NEILY EIZZA ARISSA
NURNABILLA
Contents
01.
INTRODUCTION
02.
RISK
03.
ADVANTAGES
04.
DISADVANTAGES
05.
EXAMPLE
06.
DIFFERENTIATE BETWEEN HALAL
AND ETHICAL INVESTMENT
07.
DEVELOPMENT OF HALAL
INVESTMENT IN MALAYSIA
08.
SIGNIFICANT OF HALAL
INVESTMENT IN MALAYSIA
09.
CONCLUSION
010.
REFERENCES
Introduction
Driven by ethical and Islamic investment values,
halal investing is becoming an increasingly popular
area of ​global finance. Halal investing, firmly
established in Shariah law, offers Muslim investor
to arrange their financial decisions with their
ethical and religious concepts. In order to stick to
strong ethical principles, the strategies also aims
to promote sustainable and socially conscious
approach to investing.
The word "halal" is derived from the Arabic "halal" which
means permitted or authorized. Sharia-compliant
investments prohibit participation in industries and
activities considered haram (forbidden), including
gambling, alcohol, pork products and interest-based
financial transactions (riba). Halal investing, on the
other hand, emphasizes ethical and social investing
that is consistent with Islamic beliefs and values. Halal
investors
aim
to
ensure
that
their
investment
operations are ethically and religiously acceptable by
following
Shariah
compliance
standards.
Halal
investments include various asset classes such as
stocks, bonds issued by Islamic banks, real estate and
commodities.
The choice of halal investments as the focus of the
assignment
provides
compelling
reasons
of
cultural and religious importance. Islamic investors
attach greatest importance to the culture of halal
investing as it allows them to match their financial
behavior with their beliefs. Overall, halal investing is
a special approach to money management that
combines financial goals with the ethical concerns
required by Islamic law.
RISK
In Malaysia, the practice of investing in Shariah options is
generally considered riskier than standard investment options.
This is the result of a screening process designed to adhere to
standards that avoid activities such as gambling and financial
services that rely on interest. Shariah-compliant investing can
provide investors with more choice and more direct access to
capital than traditional alternatives. This is primarily due to
restrictions imposed on certain financial instruments, such as
derivatives.
In
addition,
Shariah-compliant
funds
are
subject
to
concentration risks that may lead to increased volatility. Any
changes to Shariah interpretations or regulations have the
potential to impact the classification of securities, which will
require
investor
feedback.
Therefore,
Shariah-compliant
investments have the potential to generate returns compared
to investments that do not include high-risk industries.
In summary, although Shariah-compliant investments are
generally considered safer, it is important for Malaysian
investors to understand and evaluate the risks involved before
investing cash.
ADVANTAGES OF HALAL INVESTMENT IN
MALAYSIA
Halal investment is a common issue for every Islamic Country around the world. So basically, since
Malaysia is one of the islamic countries, halal investment is literally a norm around their communities. A
lot of people would usually question whether halal investment can give us advantages or in a simple
word is “profitable”. There’s actually a lot of advantages that we will experience from halal investment
trading. The following are some benefits on investing in halal investment :
ALIGNMENT WITH RELIGIOUS BELIEF
By raising this point halal investments are more compliant with Islamic
standards, so in this way we as muslim are giving peace of mind that their
money is being invested in a morally and ethically sound manner and
following rules on our religion.
ETHICAL INVESTING
Halal investments generally give priority to ethical considerations, such as clear
of businesses engaged in activities that are considered non-immoral. Investors
who want to allocate their capital in a socially conscious manner may find this
appealing. At this point,we can say that halal investment are more likely doing
an investment that are not run from human norm
TRANSPARENCY
By raising this point we can say that halal investment are more
transparent by showing the flow of your money that you have been
invested in. This will ensure that investors have a clear understanding
where their money is being invested and returns are generated.
ADVANTAGES OF HALAL INVESTMENT IN
MALAYSIA
COMMUNITY DEVELOPMENT
Halal investment often prioritize investment in projects or business that
contribute or positively impact the community. For example, affordable
housing infrastructure development and healthcare, this point literally shows
us that halal investments are giving priority to human welfare.
GLOBAL REACH
Halal investment opportunities are not limited to specific region or countries,
but it provides access to a global market that follows Sharia-compliant
investment. At this point we can say that is literally can enhance portfolio
diversification and potential return
DISADVANTAGES OF HALAL
INVESTMENT IN MALAYSIA
Before choosing to use this strategy, investors should be aware of the
difficulties and restrictions associated with halal investment, even though it
presents moral opportunities consistent with Islamic principles. These are the
disadvantages that the investors may face in order to invest in halal
investment:
Restricted Investment Universe
The exclusion of some industries and companies that are considered
contrary to Sharia law is an important weakness of halal investing. This could
include traditional financial services, gambling, alcohol and certain technology
companies. Therefore, investors who practice halal investing may have less
scope to invest compared to conventional investors. These restrictions may
make portfolio diversification difficult and increase concentration risk for
investors
Limited Investment Options
Shariah-compliant investment options may be restricted in some markets or
geographies, particularly with respect to certain asset classes such as
alternative investments or fixed income. Due to the lack of available options,
investors may not be able to build a diversified portfolio or optimally allocate
their investments. Furthermore, the absence of Shariah-compliant substitutes
may result in a loss of potential return growth
Largest costs
When compared to traditional investment methods, using halal
investment solutions may result in greater expenditures . Increased fees
have the potential to lower the investment returns and reduce overall
effectiveness of the halal investment approach.
EXAMPLE OF HALAL INVESTMENT
In Malaysia, halal investing often involves making financial decisions based on Sharia law. It is
prohibited to invest in companies involved in illegal activities such as gambling, alcohol, pork,
etc. Below are some examples of halal investments in Malaysia.
An Islamic unit trust fund is made up of a shared fund into which investors put money in
order to invest and make money while following the guidelines, regulations, and
standards of Shariah law. Investments made in businesses engaged in non-Shariah
compliant activities will be prohibited, including those involving interest-based lending,
conventional insurance, military weapons and ammunition, and other activities that
Syariah law believes to be forbidden. Investors can choose from a variety of Shariahcompliant unit trust funds from Malaysian financial institutions. The fund invests in
Shariah-compliant securities, including Islamic bonds, stocks and real estate investment
trusts (REITs).
Sukuk is an Islamic financial certificate, also known as Islamic bond. Its terms and
structure are Sharia-compliant and similar to Western banking bonds. Technically, Sukuk
represent an interest in an underlying financing arrangement structured in accordance
with Sharia law, whereas conventional bonds (secured or unsecured) represent the debt
obligations of the issuer. Holders of the Sukuk are entitled to a pro rata share of the
returns generated by the arrangement and the return of capital at a predetermined
future date.
One investment vehicle that meets Islamic standards is an Islamic Real Estate
Investment Trust (REIT), which is based on Shariah-compliant finance. Islamic REITs allow
investors to purchase real estate assets and get dividends from the rental income those
assets generate, much like conventional REITs do. However, the organization and
functioning of Islamic REITs are compliant with Shariah regulations. Investors can take
part in real estate investment possibilities that comply with Shariah, including Islamiccompliant property crowdfunding platforms, real estate investment trusts (REITs), and
development projects.
DIFFERENTIATE BETWEEN HALAL AND
ETHICAL INVESTMENT
For this topic, we will raise some points to differentiate between halal and ethical
investment such as religious guidelines. From this aspect, halal investments are avoiding
any investment activities that are forbidden by Islam such as alcohol, pork, gambling and
interest based activity. On the other hand, ethical investment may or may not be based
on religious guidelines or regulations.
Furthermore, the other difference between this company is Permissible Income Sources.
So basically, Halal investment prohibits earning any income from certain sources that are
unlawful in Islam such as interest (riba) and speculative trading (gharar). Ethical
investment focuses on avoiding companies that engage in activities that are harmful for
society or the environment.
The next point that we will raise is Investment Vehicles. Halal investment usually offers
specialized investment vehicles such as Islamic mutual funds, Sharia-compliance stock
and Sukuk (islamic bonds) designed to comply with Islamic finance principles. Ethical
investments may utilize a range of investment vehicles, including socially responsible
mutual funds, green bonds and impact funds, to achieve positive social and
environmental outcomes.
Cultural and religious considerations for this point we are likely to say most of the Muslim
investors are looking for investments that align or comply with their faith. In This way they
must find halal investment is more comfortable because it is based in Islamic culture and
religious beliefs. While on the other hand Ethical investment puts more trust in
philosophical and cultural viewpoints which may give attractions toward investors from
different backgrounds who value ethical considerations in their investment decisions.
In summary, we are likely to say that both of these investments have their own
perspective which follow people's interests. For people who are likely to invest in
investments that follow Sharia law and literally prohibit any activities that had been
against in Islam Halal investment is the answer. But for people who are likely to invest in
investment that follows social justice, environmental sustainability, and corporate
governance principle Ethical Investment is the answer.
DEVELOPMENT OF HALAL INVESTMENT
IN MALAYSIA
Over the years, Malaysian halal investment has grown greatly due to a number of reasons
including government initiatives, the country's growing Muslim population, and rising
public knowledge of shariah-compliant finance. This is a summary of how halal investing
has evolved in Malaysia
• Government support
The development of Islamic finance and halal investment has been actively pursued by the
Malaysian government. Initiatives such as the 2006 creation of the Malaysia International Islamic
Financial Centre (MIFC), by promoting Malaysia's leadership in Islamic finance on a worldwide
scale and encouraging investment, cooperation and expansion in the Islamic finance sector, MIFC
acts as a strategic platform. The Shariah Advisory Council of the Securities Commission Malaysia
has also contributed to the development of a halal investment-friendly regulatory environment.
SAC of SC is responsible for reviewing and providing guidance on the Shariah compliance of
capital market products, services and activities regulated by the Securities Commission
Malaysia. This involves Islamic securities (sukuk), Islamic fund schemes (such as Islamic share
trusts) and other Islamic financial instruments.
• Islamic Finance Ecosystem
The Islamic finance ecosystem refers to the network of institutions, products, regulations, and
practices that comprise the Islamic finance industry. Contrary to interest-based and speculative
conventional finance, this kind of money in accordance with Islamic Shariah principles does not
permit interest, but allows only the risk sharing and assets-backed transaction and ethical
investment. The islamic finance industry in Malaysia is quite advanced with islamic banks or
Takaful (an islamic-based insurance product) companies along with Shariah-compliant
investment funds or Islamic capital markets. This infrastructure makes the halal segment of the
investment area more wide and rich providing investors with options across all asset classes.
• Education and Awareness
They must consider the screening process of the Shariah. Investors must be informed about the
criteria companies listed on the Bursa Malaysia (the Malaysia stock exchange) must meet
Shariah screening, to ensure the compliance of companies with Islamic principles. Knowledge of
halal investments is important to the country in order to attract local and foreign investors
interested in halal investment alternatives, as well as the government’s ambition to establish
Malaysia as a leading Islamic financial centre. It is important for organizations in the food,
pharmaceutical and cosmetics industries to be familiar with the implications of halal
certification. Halal certification assures investors and customers that goods and services comply
with the food and hygiene requirements of Shariah law.
Significant of Halal Investment
in Malaysia
Malaysia has established itself as a world leader in the Halal industry, and the
strategic efforts that it has put out have won respect not just in Malaysia but also
on a global scale. For the purpose of highlighting Malaysia’s position at the Global
04 (GHaS) 2023, which took place in Kuala Lumpur, Prime Minister Datuk
Halal Summit
Seri Anwar Ibrahim underlined the country’s global recognition and leadership.
Malaysia’s halal ecosystem and certification procedures have attracted the
attention of world leaders from nations like Japan, China, and South Korea, who are
among the most powerful economies in the world. The accuracy and well-test
ecosystem that Malaysia possesses in the Halal industry have been recognised on
Location : 123 Anywhere St., Any City
a global scale.
Growing the Halal Economy, the concern of halal involves more than just loyalty to
a certain religion. At this point, it includes a wide range of elements of life, such as
personal care goods, drugs, services, and economic operations. This business has
05 rapid development as a result of the growing number of non-Muslim
experienced
consumers who are interested in Halal products all around the world. Businesses
from around the world, including Coca-Cola, Nestle and Hershey, have chosen to
establish operations in Malaysia due to the country’s advantageous location and
business-friendly legislation.
The goal of Halal Investing in Malaysia is to make Malaysia a destination for
businesses that are built on the practices of Halal. Malaysia is a desirable
destination for both domestic and international businesses to invest in halal
operations as a result of the government’s dedication to the development of the
sector. Halal exports, Malaysia’s strategy approach to increasing its halal export
market comprises initiatives spearheaded by the government, collaborations with
industry, and expansion into global markets.
To sum up, Malaysia is a desirable destination for halal investment because of its
leadership position in the halal business, as well as its commitment to precision
and ecosystem growth. Both Muslim and non-Muslim populations all across the
world are paying attention to the thriving halal sector, which continues to draw
attention to itself.
CONCLUSION
Halal investments based on
Shariah
principles
are
becoming
increasingly
Sprout Package
popular around the world,
allowing Islamic investors to
make financial decisions
based
on
their
own
principles
and
beliefs.
Providing an approach to
ethical
and
sustainable
investing, targeting projects
that benefit communities,
e.g. Affordable housing and
healthcare in Malaysia safer
than conventional. This is
due to a comprehensive
review of Islamic values, but
issuance restrictions may
affect Halal businesses that
may face investment and
liquidity
issues,
concentration
risks
and
lower returns.
Halal investments also have
weaknesses, such as limited
investment
scope,
concentrated risk, Malaysian
Islamic law prohibits halal
investments
in
illegal
businesses,
while
ethical
investing avoids the following
companies:
Harmful to society or the
environment Malaysian halal
investments increase due to
Government regulations, the
growing Muslim population, and
public awareness of Shariacompliant financing. Finally,
halal certification ensures that
the product meets Islamic
nutritional
and
hygiene
standards, and Investors should
be aware of Shariah filters.
References
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