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INTRODUCTION Equity market is a wide market that involves many sellers and buyers around the world .

According to surah Al-Baqarah ayah 265 Allah has stated that, ..God hath permitted trade and forbidden usury. Islam allows trade and prohibits riba. The problem is elements and instruments exist in equity market abstain Muslim to participate and be active in the equity market. As a Muslim we must engage in halal business and Muslim shouldnt cooperate in haram business. An Islamic Equity Fund is a corporation based on the investors surplus of liquidity and the professional skills of the fund manager. The liquidity is to be invested in stock of companies that operate according to the Islamic law. Stock exchange is a market where securities and shares are bought and sold. The stock exchange is a natural corollary of the principle of limited liability. The limited liability theory restricts the ability of each holder of shares to his own holdings and does not extend to his personal fortunes. The Islamic economy would have the institution of stock exchange, which would fit in its overall framework and suit its socio-economic goals. For example, the Islamic economy would attempt to eliminate speculation by non-genuine investors, without abolishing a free-market for shares and certificates. The Islamic stock exchange would deal in equity capital available in the form of mudarabah or shirkah certificates. Interest bearing loans and securities do not exist in the Islamic economy. Similarly there would be no preferences shares in the Islamic economy as it involves fixed pre-determined guaranteed rate of return which is akin to riba and thus un-Islamic. The Islamic equity market is reflected by the stock-broking activities, Islamic unit trusts, Islamic index and the list of the Syariah-approved counters. In terms of the stock-broking activities, the country now has a full-fledged Islamic stock-broking firm and three conventional stock-broking firms offering Islamic stock-broking services. These article review will discuss about the stock market from an Islamic perspective and the need of Islamic economy for capital markets and stock exchange. We also summarize about the norms and ethics in Islamic finance especially on stock markets.

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ARTICLE REVIEW 1 NEED OF ISLAMIC ECONOMY FOR CAPITAL MARKETS Financial intermediation institution, including capital markets, are tool to seeking to achieve

economic efficiency. Many studies have proved the close link between the rate of ecomic growth and the development of financial institutions. They are particularly significant for an islamic society for the following two reasons: Based upon participatory financing. Since lending has no place in commercial activities and is not a tool of financing production, the tools and institutions of attracting savings by way of participation in capital, as well as in investment risks and gains, are suitable institutions for an islamic economy. Because they provide a process, whereby funds are made available to investor by savers within the legally prescribed restriction of shariah. Depend mostly upon investment (rather than on lending). This formula can invest savings for very short term. Thus, the financial markets can play the role of supplementary institutions which complement the role of islamic banks, as they provide the tools through which the optimum use of the available financial resources can be achieved for the bank.



The stock exchanges functions for modern economies may be summed up as follows. It is an instruments which is capable of attracting savings and directing them for investment purposes. Matching the preferences of savers and investors is possible through the basic idea of a stock exchange Stock exchanges make available a tool through which investment risks can be priced, and a method of transferring and exchanging these risks among investors. They provide an effective tool for evaluating the performance of the private sector and public companies and the facility for exchange of information about investment opportunities.


OVERALL STRUCTURE OF MODEL FOR ISLAMIC STOCK EXCHANGE To build up a structure of the islamic market depending on legally permitted and avoid from

prohibited activities. Then ensure full compliance with shariah guideline principles. The essential element that we discuss in journal represent the overall structure for the stock exchange operation. These are: The market should avail ways and methods of pricing the risk involved in maintaining securities, so that an investor may select the degree of risk which compatible with his preferences. Standardization allows all market contract and transactions to have a specific uniformity. The market should remain in continous operation through strict exchange regulationsand effective supervision by the market authority of various types of transactions.


ECONOMIC IN SIGNIFIGANCE OF OPTIONS IN THE STOCK MARKETS. Option market spread in the 1980s so that now there are more than 40 stock exchange

trading in options contract throughout the world. Options are divided two types. First, call option which give the buyer the right to buy a specific number of shares of a certain company or any other securities. Second, put option which is a contract that gives the buyer , one who pays the price the right to sell a certain number of shares or other securities. Option contract has many advantages and significance economic. These are: They bring an increase in the liquidity of the market Options contract lead to reduction in the effect of fluctuations in the prices of securities to which these contract apply Investing in the stock market involves a high level of commercial risk due to price fluctuation and the influence of the moods of other investor on the market. Eventhough, some possible shariah objection to the forms of options prevailing in contemporary stock market but it is essential to avoid the element of gambling and the following measures which are not common in the stock merkets should be adopted: The dealings of the central authority should be limited to the actual stock holder. A contract will become valid on the last day of its term. Contract will be terminated at the first hour of the opening of the market on the last day of the contract.



Norms of Ethics in Islamic Finance Some important norms in Islamic ethics as a applicable to stock markets. In Islamic Finance always bear and the contract must be free , beside that it also must be from elements of Al-riba, Al-Gharar, Al-qimar, Al-Maisir, price control and manipulation, entitlement to transact at fair prices, entitlement to equal, adequate and accurate information and freedom from Darar. Freedom To Contract Islam encourages the Muslim to enter the transactions and trading without any coercion or fraud elements involves. In surah Al-Baqarah verse 275 Allah Said: Allah has made trade lawful. The al-quran also said : let there be among you traffic and trade by mutual goodwill is from surah Al-Nisa verse 29. However the contract must be have requiring specific injunctions as in the case of the framework for conventional finance. Freedom to Al-Riba Riba is prohibited in Islamic Finance. Riba is related to the price manipulation. For the wrong-doing of the Jews, We made unlawful to them certain good foods which has been lawful to them, and for their hindering many from Allah's Way And their taking of Riba (usury) though they were forbidden from taking it and their devouring of men's substance wrongfully (bribery, etc.). And We have prepared for the disbelievers among them a painful torment. The translation from Surah Al-Nisa verses 160-161 state that someone involves with riba will be punished. In addition riba gives the worst implications to individual, society, economic and various aspect. Freedom from Al-Gharar Al-Gharar is the excessive Uncertainty. The contracts and transaction must be free from excessive gharar elements. Islamic scholars disallow a contract involve excessive uncertainty and consequently. Ibn Taimiyyah said gharar is the "When one side takes the authority and one side more does not receive due he can". In Kitab Qalyubi wa Umairah state Mazhab Imam Al Shafie define gharar as "A (aqad) that therefore unseen from us or matter between two possible in which most often happen was that most dreaded".

Freedom From Al-Qimar and Al-Maisir The Holy Al-Quran and Sunnah prohibited gains made from games of chances with involved with unearned income. Al-Qimar and Al-Maysir is a kind of the contract involves the excessive uncertainty. They are the kind of involve with the worst speculation. The conditions of excessive uncertainty that make speculation is a kind of game chance and hence, therefore its forbidden. An Islamic economic unit is required risk and effort in any profit. Freedom from Price Control and Manipulation Islam emphasize the free market in Islamic economic. The price determined by the power of demand and supply. There should not intervention by regulator in the fixation price. But some scholar like Imam Ibn Taimiya said there is permissible. Islam condemns any manipulation in the fixation price because there is similar to Riba. Entitlement to Transact at Fair Price The price in the market must be determined by power of demand and supply. It is to avoid manipulation and unfair price in the market. But some cases, pricing is based on a valuation exercise. Al-Sunnah (Tirmidhi, 1235) O Messenger of Allah! Prices have shot up, so fix them for us. Thereupon the Messenger of Allah said: Allah is the One Who fixes prices, withholds, gives lavishly, and provides, and I hope that when I meet Allah, none of you will have any claim on me for an injustice regarding blood or property. Entitlement to Equal, Adequate and Accurate Information Release of incorrect information is forbidden in Islam. Information in the contract must be accurate to avoid misunderstanding. Hiding the information is against the Islamic ethics. According the holy prophet, the informational disadvantaged party at the time of the entering into the contract has the option to annual the contract. Freedom from Darar Darar mean possibility affect the third parties in a contract between two parties. When the two parties make the any decision, importance of the third parties will be lost. In Islam, all parties will have equal right. There is to avoid that from repression to another party.


CONCLUSION Islamic Equity Market in Malaysia is still in their infancy stage of growth and

development. There are several recommendations to improve the performance of Islamic Equity Market: leverage Islamic Equity Funds with the online technology revolution, changing the current strategy and role of Islamic Equity Funds, adding more guidelines of the selection criteria of the Islamic Equity Funds, unifying the Islamic Investment guidelines and developing new Islamic investment products, maybe similar to the Islamic Equity Funds but must customized according to Muslims Financial needs, based on Islamic values and benefits from the opportunities available in Muslim emerging mark. Islamic equity market in Malaysia shows a good improvement each day. Islamic equity market in Malaysia has grown and developed where as many professionals could manage their funds through various Islamic units trust funds and assets management companies. In Malaysia, Islamic equity related-product must compliant with Shariah law. Negative criteria must be avoided from the equity investment. Shariah Advisory Council plays a major role in the development of Islamic equity market in Malaysia. As long as, the concept of Mudharabah and Musyarakah are practiced in equity financing, investors may enjoy permissible benefit. From these article review, we have found that Islamic equity market in Malaysia especially stock market are needed in Islamic economy . Elements such as riba and gharar have been discuss to examine the permissibility of the product from the syariah point of view. We also can conclude that Islamic equity market in Malaysia can go more further as long as it follows all the rules and regulations stated in order to make the product permissible in Islam. Ethics also is one of the most important side to consider as it is related to the process of trading the product in the market. We as a Muslim has to follow all the rule and does not make a profit maximization as our goal in any trading activities.