KUALA LUMPUR • The world's second-largest asset manager by market value plans to attract some of the US$376 billion (S$528 billion) parked in Malaysian bank deposits by setting up global Islamic stock and bond funds next year.
Franklin Templeton Investments, which has more than US$801 billion in assets, will seek approval from the regulator to start at least two syariah-compliant funds to serve as offshoots from the three it has in Luxembourg, country head Sandeep Singh said in an interview in the Malaysian capital last week.
That would complement similar investment options available from CIMB- Principal Asset Management and RHB Islamic International Asset Management.
The new funds will widen choices for Malaysians looking to diversify after this year's 17 per cent plunge in the ringgit and a political scandal hurt confidence. A looming US interest rate increase has already prompted global investors to offload twice as many stocks in the South-east Asian nation as they did for all of last year as well as to cut bond holdings.
"People are looking at more international investments because the volatile currency highlighted the merits of diversification," said Mr Singh. "As markets get more sophisticated, it's a matter of time before global equity and bond funds get more traction among Malaysian investors."
The California-based fund trails behind BlackRock in terms of assets, according to data compiled by Bloomberg.
Franklin Templeton launched its first syariah-compliant bond fund in Malaysia at a presentation in Kuala Lumpur on Nov 19, targeted at local individual and corporate investors. It currently oversees more than US$4 billion of Islamic and conventional assets in the country on behalf of institutions and high net-worth investors, said Mr Singh.
It's a "healthy trend", given that the availability of Islamic funds is limited compared with conventional counterparts, he added.
BIMB Investment Management, a unit of Malaysia's oldest bank providing services in accordance with Muslim principles, also started a multi-currency global syariah investment option this month.
Standard & Poor's forecasts that growth in the US$2 trillion Islamic finance industry will slow to single-digit levels next year, from 10 per cent to 15 per cent over the past decade.
As the ringgit weakened this year to become Asia's worst- performing currency, foreign investors pulled RM18.5 billion (S$6.2 billion) from Malaysian stocks, more than the RM6.9 billion for the whole of last year, according to a report from MIDF Amanah Investment Bank. There has also been an outflow of RM16.2 billion from debt.
"It's natural for us to offer the funds to Malaysian investors, given the developed finance market here," Mr Singh said.