KUALA LUMPUR, 28 May 2020 – Malaysian Islamic fund’s assets under management (AUM) has decreased by around 15% due to the Covid-19 pandemic, but is expected to experience incremental growth in the longer term, boosted by tax and policy initiatives, says Fitch Ratings.
Moreover, the rating agency said, Malaysia’s Islamic fund mix is more balanced, and therefore aggregate Islamic fund AUM are less sensitive to developments.
“AUM in Malaysian Islamic funds decreased by around 15 per cent due to the effects of the pandemic. Conversely, AUM in Saudi Arabian funds increased, making Saudi Arabia’s AUM larger than Malaysia in this respect,” it said in a statement.
Fitch also considers Saudi Arabia to be more vulnerable to future declines in Islamic fund AUM compared to Malaysia, particularly in the event of a sustained market recovery leading to outflows from money market funds (MMFs).
Citing South Korea as an example, it said the country’s MMFs saw strong inflows at the beginning of the pandemic, followed by sharp outflows as lockdowns lessened.
“If Saudi Arabia follows the same trend, its aggregate Islamic fund AUM overall could decline, as MMFs dominate the Islamic fund mix in Saudi Arabia,” the rating agency said.
Fitch said the Islamic mutual fund sector is considerably more concentrated in Saudi Arabia than in Malaysia.
“The Saudi Arabian Islamic fund segment is largely concentrated on MMFs, and has fewer Islamic funds than Malaysia’s, and so idiosyncratic issues in larger Islamic funds in Saudi Arabia may have disproportionate overall market effects,” it added.
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