Hong Kong's market watchdog has cleared the way for the territory's first Islamic fund, as the financial centre tries to compete with Singapore and Malaysia as a hub for Muslim investment.
“To further consolidate Hong Kong’s position as a global financial center, we should actively leverage on this new trend by developing an Islamic financial platform in Hong Kong,” Donald Tsang, the Chief Executive told legislators in his annual policy address this year.
“Apart from stepping up our efforts to promote Hong Kong’s financial services to major Islamic countries and regions, we will focus on developing an Islamic bond market," he said.
Islamic finance fuses principles of sharia or Islamic law and modern banking. Funds are banned from investing in companies associated with tobacco, alcohol or gambling, considered taboo by Muslims.
The system also bans the earning of interest.
A report earlier this year valued Islamic financial assets currently under management at more than 400 billion US dollars worldwide, with the industry growing at double digits annually.
Malaysia has "effectively established itself as the regional, if not global, hub for Islamic finance," said the report by Financial Insights, a company under market research and analysis firm International Data Corp (IDC).
Indonesia, Pakistan, Thailand and Singapore are also promoting Islamic finance.