AN INVESTMENT APPRAISAL OF INTERNATIONAL MARITIME ASSETS FOR MALAYSIAN ISLAMIC FINANCIAL INSTITUTIONS – THE CASE FOR EQUITY FINANCE

Abstract

The purpose of this research is to investigate the overall investment
performance of international maritime assets in order to facilitate
Islamic equity finance and investment involving Malaysian Islamic
finance institutions, retail and also institutional investors. Shipping is
a strong growth industry with about 84% of global trade carried by
the international shipping industry. The problem is that Malaysian
Islamic financial institutions have essentially no exposure and thus
understanding of international shipping. However, shipping is a
highly capital intensive industry and currently 75% of ship lending
has been conducted by European banks and financed on a
conventional basis. This research involves an investment analysis of
a full population of historical data over a period of 20 years to
evaluate maritime performance by adopting IRR, net yield and
standard deviation measures of risk and return. We also develop a
correlation matrix for maritime assets and compare returns to other
real and financial investments. Our findings reveal that whilst
earnings are volatile in comparison to capital market financial
products, unlevered, tax-free returns on maritime assets are very
attractive. The significance is that Islamic equity finance, rather than
debt at the time-value-of-money should enable the development of
international shipping in Malaysia.