Malta stock exchange to launch islamic equity index, eyes sukuk

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Feb 4 The Malta Stock Exchange (MSE) will launch on Monday an Islamic equity index aiming to attract business from Middle East firms, a move it hopes will also prompt the government to issue Islamic bonds (sukuk), senior executives told Reuters. The 25-year old MSE is rolling out a new strategy which includes facilitating financial products that follow Islamic principles such as bans on investing in alcohol, tobacco and gambling-related businesses. The launch of an Islamic index, developed alongside Dubai-based sharia advisory firm Dar al Sharia, and a debut sovereign sukuk would mirror steps taken by Britain and Luxembourg to develop their own credentials in the sector.

"The concept of Islamic finance is not new, but this is the first time an organisation in Malta is taking a concrete step to move forward," said Joseph Portelli, chairman of the MSE. In 2011, Malta's financial regulator issued a guidance note on Islamic investment funds, the first EU member country to do so, although no such funds have been listed yet.

The government has now commissioned a report on Islamic finance and is conducting studies with legal advisors to review the regulatory and tax implications of issuing sukuk, said Eileen Muscat, chief executive of the MSE.

There is ample domestic demand for government debt, so a sovereign sukuk would have to be justified as a strategic decision rather than a fiscal one, she added."From a regulatory point of view it's not nearly an issue. The regulations are wide enough to accommodate sukuk."The exchange is also launching this month a new capital market for small and medium-sized firms.