The stock exchanges of Saudi Arabia and Malaysia have signed an agreement to foster closer ties between the two bourses with a focus on Islamic finance, part of broader efforts to increase cross-border activity in the industry.
The agreement will see the exchanges share expertise and developing human capital which is likely to cover areas such as equities, mutual funds and Islamic bonds, or sukuk.
The two countries are the largest Islamic finance markets globally, holding a combined $682 billion in Islamic banking assets, according to Thomson Reuters data.
Saudi Arabia’s Tadawul is home to the largest Islamic banks in the world, while Bursa Malaysia hosts the largest and most liquid market for trading sukuk.
Islamic finance, centred in southeast Asia and the Middle East, follows religious guidelines such as a ban on interest and monetary speculation, but for the most part the two regions’ markets developed independently from each other.
The agreement follows stronger cooperation between the Islamic finance centres, in particular the Gulf and Southeast Asian regions, despite traditional differences in the design and implementation of sharia-compliant financial products.
Saudi Arabia’s exchange has already reached similar agreements with its Abu Dhabi and Bahrain counterparts.
In October, the central banks of Malaysia and the United Arab Emirates signed an agreement to foster closer economic ties, including in the area of Islamic finance.
In November, Malaysia’s securities commission revised its guidelines for screening equities that qualify for Islamic investment, moving them closer to the approach used in the Gulf.