London : There has been an increasing interest from the Middle East for Sukuk and Takaful with an increasing number of financial products in both areas, says Tariq Al-Rifai, Director, Index Investment Strategy, S&P Dow Jones Indices.

Tariq Al-Rifai will be speaking at the upcoming marcus evans Middle East Investments Summit 2012 in Dubai, UAE, 4 – 5 November.

-How can Middle East investors overcome current challenges?

Trading volumes of Middle Eastern stock markets have doubled up in many cases over the past year. While investors have regained confidence and started to re-enter the market, they are mostly investing locally as well as in places such as South Asia and North Africa, rather than in developed markets. For instance, countries such as China, Malaysia and Singapore hold good potential for Middle Eastern investors.

– What opportunities do you foresee in the Islamic finance space? How can Middle East investors take advantage of these?

The market for Sukuk has been growing and is expected to continue to do so, but the market for Takaful holds even greater possibilities. The percentage of insured population in the region is very low, even by emerging market standards, and many insurance products are new and unfamiliar to investors. When talking about insurance, Takaful is the natural choice in the Middle East and, as Takaful companies grow so does the demand for Islamic investment products in which to invest their premiums, they will drive the development of new Islamic investment products.

– How can Middle East investors expand into the Sukuk space?

The Sukuk market is driven by a strong demand from the Middle East region, whereas there is a limited amount of Sukuk issuers based in GCC and Malaysia. For the Sukuk market to be fully developed, more international buyers need to enter the market, and more importantly, they need to enter the market not only to satisfy demand, but also to give international recognition to Sukuk as a viable funding alternative for companies in Europe and the US.

– What portfolio diversification suggestions can you give?

Portfolios in this region tend to be heavily weighted towards real estate, with high net worth investors investing much of their wealth in their own companies. This is slowly changing and a lot can now be done today within the equity space. However, there is still a big gap in fixed income and income generating assets, which could be filled by Takaful in the near future.