UAE and Malaysia strengthen investment ties

In another deal struck in the United Arab Emirates (UAE) financial sector, the $25 billion Khazanah Nasional Berhad of Malaysia has bought a 25 per cent stake in Dubai Islamic investment firm Fajr Capital for $150 million.

Khazanah, the Malaysian Government’s strategic investment arm, made the investment as Fajr raised $588 million from investors including the Abu Dhabi Investment Council, Brunei Investment Agency and the Mohammad & Abdullah Subeaei Investment Compnay, or MASIC, a private Islamic finance company within the Saudi Arabian conglomerate Al Subeaei.

The deal follows the Malaysian Government’s announcement in July that an Abu Dhabi sovereign wealth fund, thought to be the $14 billion Mubadala, would make co-investments totalling $1 billion with a new Malaysian sovereign fund, the 1Malaysia Development Berhad (1MDB).

While this deal focused on co-investments in the real estate, energy and hospitality sectors, Farj is a provider of Shariah-compliant financial services in major Muslim regions.

Tan Sri Dato’ Azman Mokhtar, managing director of Khazanah and also a director of Fajr, said Islamic finance was a “key priority” for Malaysia and that the deal should promote further economic cooperation between Malaysia and the UAE.

“This partnership also embodies Malaysia’s deepening links with the Middle East and broader Muslim world – regions that are important sources of capital and attractive markets for us to invest in,” Mokhtar said in a statement.

Fajr stated that it was confident its shareholder base would connect the UAE with other Islamic regions, provide insights into these financial markets and spawn co-investment opportunities.

Farj is led by Iqbal Khan, formerly the founding chief executive of HSBC Amanah, the bank’s global Islamic financial services division, and staffs offices in Dubai, London and Kuala Lumpur.

Khazanah holds stakes in more than 50 companies in various sectors, and is the state agency responsible for strategic cross-border investments.

In June, it formed a cross-border investment partnership with the $27 billion Korea Investment Corporation.