A new shariah-compliant index launched by FTSE Russell, the global index, data and analytics provider, will track companies listed on the Singapore Exchange (SGX).
The FTSE ST Singapore Shariah Index is designed to track shariah-compliant companies and can be used as the basis of investment products. Independent screening is carried out by Yasaar Ltd, a UK-incorporated organisation with a global network of expert shariah scholars.
The indexes have been certified as shariah-compliant through the issue of a fatwa by Yasaar’s principles.
The global Islamic banking and finance industry has grown over the years to have more than $2tn in total assets as at end-2017. This growth has been accompanied by a need for appropriate asset management tools, including benchmark equity indexes that are shariah-compliant.
Using the FTSE ST All-Share Index as a base universe, constituents are screened against a clear set of shariah principles to create a robust shariah-compliant index for the Singapore market. At launch, there are 48 constituents in the FTSE FT Singapore Shariah Index.
Filtered out from the new index are companies involved in non-shariah compliant activities such as non-Islamic banking, finance and insurance; alcohol; pork-related products and non-halal food production; entertainment, tobacco and weapons. The remaining companies are screened to ensure they meet certain financial ratios deemed shariah-compliant.
FTSE Russell managing director Asia Jessie Pak said, “Since FTSE Russell began calculating shariah-compliant indexes over 10 years ago, we have continued to see growing demand for appropriate benchmarking tools that can be used as the basis for shariah-compliant investment products.”
SGX senior vice president, head of market data and connectivity Ng Kin Yee said, “The outlook for the global Islamic fund and wealth management sector continues to be positive, supported by an increasing range of Islamic financial instruments available to investors. This index will serve as a benchmark for shariah-compliant funds looking to invest in Singapore, and potentially pave the way for creation of other shariah-compliant products.” M