Stock markets’ centre of gravity has undeniably shifted from Europe to the US. 1 In 1900, railway shares accounted for 63 percent of the US stock market and 50 percent of the UK stock market, while today, these shares account for less than 1 percent. New industries have emerged and industries already established in 1900, such as telecommunications, have changed radically.2 In the course of these past 100 years, global equity markets have experienced the Great Depression of the 1930s, the Second World War, the oil price shock followed by stagnation in the early 1970s, the dotcom crash in 2000and the financial crisis ten years ago. The management of the GPFG must have a long-term perspective that extends just as far into the future. We do not know which companies or countries the fund will be invested in 100 years from now, but we do know that investments will have to change over time. We must also expect that the return on the GPFG will fluctuate substantially in periods and that the fund will have to be managed through future dramatic events. What we do not know is when, how or why such events will occur. Maintaining stable management of the GPFG requires sound management of financial risk. An important feature of the fund’s strategy is diversification, where the fund’s capital is invested in many different assets worldwide, reducing the vulnerability of the fund’s return to developments in individual companies, sectors or countries. Nevertheless, diversification cannot shield the GPFG from crises that have a broader impact.
The merger of the Dow Jones Islamic Index for Malaysia and the existing RHB Islamic Index, besides achieving some form of economies of scale with reduced duplication of efforts, will have the significant added advantage of both international and domestic recognition. Moreover, as one of the leading countries that support the growth and development of Islamic financial markets, it is most appropriate for the development of the index to be part of the Dow Jones Islamic World Index. Within a global index such as the Dow Jones Islamic World Index, the inclusion of the Dow JonesRHB Islamic index will increase the potential for further investments into Malaysian Islamic equities. Malaysia is well positioned to benefit greatly from this as the infrastructure and marketplace for Islamic financial instruments and investment has long been developed. Indeed, in our equity market, more than 80% of the counters in Bursa Malaysia or previously known as the Kuala Lumpur Stock Exchange, are Syariah compliant. Ladies and Gentlemen, Certainly, the development of benchmark market indices is an important part and parcel of the continued progress, contributing to the further deepening of capital markets. Two particular areas of heightened focus are in the regional bond market and international Sukuk market. In the region, the Asian Bond Fund 2, launched by the EMEAP central banks in December 2004, is aimed at promoting the further integration of the regional countries' bond markets and the creation of a new asset class for Asia and global investors.