The merger of the Dow Jones Islamic Index for Malaysia and the existing RHB Islamic Index, besides achieving some form of economies of scale with reduced duplication of efforts, will have the significant added advantage of both international and domestic recognition. Moreover, as one of the leading countries that support the growth and development of Islamic financial markets, it is most appropriate for the development of the index to be part of the Dow Jones Islamic World Index. Within a global index such as the Dow Jones Islamic World Index, the inclusion of the Dow JonesRHB Islamic index will increase the potential for further investments into Malaysian Islamic equities. Malaysia is well positioned to benefit greatly from this as the infrastructure and marketplace for Islamic financial instruments and investment has long been developed. Indeed, in our equity market, more than 80% of the counters in Bursa Malaysia or previously known as the Kuala Lumpur Stock Exchange, are Syariah compliant. Ladies and Gentlemen, Certainly, the development of benchmark market indices is an important part and parcel of the continued progress, contributing to the further deepening of capital markets. Two particular areas of heightened focus are in the regional bond market and international Sukuk market. In the region, the Asian Bond Fund 2, launched by the EMEAP central banks in December 2004, is aimed at promoting the further integration of the regional countries' bond markets and the creation of a new asset class for Asia and global investors.

Ladies and Gentlemen, Today's launching of the Citigroup Malaysian Government Securities Index and the Dow Jones-RHB Islamic Malaysia Index, marks another step forward in the development of Malaysia's capital markets. The importance of these two indices should not be underestimated. This initiative by the Citigroup and RHB and Dow Jones is an important contribution to the development of our domestic markets. With globalization, increased connectivity and rapid financial market integration, investors are no longer restricted to investing within their own domestic borders. Indeed the 'home bias' or tendency of investors to invest almost all their assets domestically, has been rapidly dissipating. Investors look abroad for enhanced returns and diversification opportunities. For more than a decade now, the pace of diversification across borders by pension and insurance funds, asset management companies, hedge funds and high net worth individuals has increased dramatically. A region that has emerged strongly in the international investors radar screen is the East Asian region. Strong, sustainable economic growth, rapid expansion in intra-regional trade and investment have led to a correspondingly accelerated pace of development of the capital markets and to an increase in the  BIS Review 49/2005  1  pace of financial liberalization and integration. In this environment, it becomes important to promote well-developed, deep and liquid capital markets. Today's launch of the Malaysian Government Securities index will assist investors who have increasingly been attracted to Malaysian fixed income securities as an important asset class.