Islamic Fund Management
63
Country
and Credit
Ratings
Stage of
Market
Development
% of Shariah-
Compliant
Stocks Against
Total Market
Macroeconomic Brief
BB (S&P),
Baa3
(Moody’s),
BB+ (Fitch)
stocks
represent
40% (160
stocks vs 400
total stocks)
under a more transparent and predictable policy
framework. Nevertheless, political and policy
uncertainties remain as dampers that prevent a change in
its credit rating. GDP was lifted 1.3% in 2017, exceeding
the National Treasury’s projected 1.0% growth.
Morocco
BBB-
(S&P), Ba1
(Moody’s),
BBB-
(Fitch)
Infancy Nil According to Moody’s, the factors supporting Morocco’s
rating include an improving external position and fiscal
imbalances. Moody’s also takes into account the
continued progress in the country's industrialisation
strategy, which aims to increase the manufacturing
sector’s share to 23% of GDP by 2020, from 16% in 2017.
Sources: Credit rating agencies news releases, Regulator’s reports
1. Healthy Macroeconomic Factors
The bedrock of any capital market is a country’s macroeconomic factors, the most influential of
which are the stability of economy and currency, GDP growth, rate of inflation and
unemployment rate. As a country’s macroeconomic health improves, so will its capital
markets, which will in turn have linkages to the performance of the fund management
industry.
2. Robustness of ICM Activities
The overall performance of a country’s capital markets will support the progress of its ICM.
Since ICM activities, i.e. equities and sukuk, will feed the development of funds, it is important
to ensure focus is given to the overall development of a domestic ICM. Without it, the Islamic
fund management industry will face a dearth of Shariah-compliant assets.
3. Build-up of Listed Shariah-Compliant Companies
The rise in Islamic finance assets over the years has been predominantly demand-driven, with
Islamic banking and sukuk representing 89% of total Islamic assets. This solid demand has
encouraged more listed corporates across different jurisdictions to undergo Shariah screening.
The matching of common values between Islamic finance and SRI investors has further
incentivised corporates to comply with international Shariah screening methodologies in a bid
to attract these SRI funds. As market awareness grows, the number of Shariah-compliant listed
securities is envisaged to rise in tandem. In preparation for this, the infrastructure of the local
stock exchange must be enhanced and its systems upgraded to cater for more listed stocks.
4. Captive Demand for Shariah-Compliant Investments or Assets
Having a captive market for Shariah-compliant investments or assets will have a ripple effect
on the pipeline for Islamic funds. Overall, Islamic banks, takaful operators, and institutional
and retail investors constitute the large pool of investors seeking Islamic funds. As a market
matures in building up its Islamic finance industry, the captive base is expected to grow
alongside, with an increase in the number of Islamic banks and takaful operators.