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Thursday, November 20, 2014
Shariah Food demand shows Halal stock promise
Eight years ago, Taleb Mohamad Almahmoud started importing a non-alcoholic beer popular in the Middle East to Malaysia. Now he's bringing more than 300,000 bottles of Dubai-brewed Barbican into the country a month.
"There are many Arabs here and they like the drink because there's no alcohol," the Syrian-born Almahmoud said in an interview near his shop in downtown Kuala Lumpur that also stocks spices, couscous, pickled olives and Turkish coffee. "Malaysians like it too."
The popularity of halal products such as Barbican that comply with the Koran's tenets helped drive a 4.6 per cent gain in the SAMI Halal Food Index of shares this year, beating the 0.2 per cent rise in the Bloomberg World Food Index by miles.
The industry's expansion is also flowing through to debt markets, with the Malaysia International Islamic Financial Centre estimating companies involved in Shariah-compliant food, textiles, tourism and healthcare have sold $US5 billion of sukuk - the Islamic equivalent of bonds - to date.
The outlook for the $US2 trillion ($2.3 trillion) global halal industry that also includes fashion and entertainment is underpinned by a worldwide Muslim population that the Pew Research Center sees growing at twice the rate of non-believers through 2030.
Demographics like that have lured the world's biggest food company Nestle, which markets Shariah-compliant noodles and breakfast cereals.
"Halal is a huge industry and the growth rate is massive," said Baiza Bain, a director at Islamic finance consultancy Amanie Advisors in Melbourne. "Companies are making sure that they adopt the inclusiveness policy that will broaden their market."
Spending by Muslim consumers on halal products and services worldwide is forecast to increase by more than half to $US2.47 trillion by 2018 from 2012, according to the Kuala Lumpur-based MIFC.
Nestle (Malaysia) ships its products to more than 50 countries and may soon start exporting to Europe and South America, said Zainun Abdul Rauf, executive director for corporate affairs.
The share price of the company, which set up a 700 million ringgit ($242 million) sukuk program in 2003, has risen 0.9 per cent this year, faring better than Malaysia's benchmark stock index with its 2.3 per cent drop.
Worldwide sales of bonds that comply with Islam's ban on interest have increased tenfold in the last decade. Issuance has reached $US39.9 billion so far this year, 13 per cent more than at the same point in 2013, data compiled by Bloomberg show.
Ajinomoto, Japan's third-largest food company, sells Shariah-compliant food seasonings and drink sweeteners. The Asian nation and Spain have held halal summits this year to explore ways to develop the industry, while the UK plans to set up a business park to produce Shariah-compliant meat, according the MIFC report.
As well as prohibiting products that include alcohol and pork and banning gambling, Islamic tenets require that animals be slaughtered in a particular way accompanied by the recitation of a prayer.
Halal Industry Development Corp., a Malaysian government agency, estimates the global industry excluding financial services exceeds $US2 trillion and will grow 4 per cent to 5 per cent annually. Demand for Shariah-compliant products will come from established centres such as the Middle East as well as emerging markets including India, Pakistan and Bangladesh, said its chief executive, Jamil Bidin.
"The global demand is huge," he said. "Many non-Muslim countries are participating in this because they see that halal is big business."