Shariah-compliant index tracking SGX-listed companies launched, Stocks

Shariah-compliant index tracking SGX-listed companies launched, Stocks

Fri, Oct 05, 2018 – 9:49 AM

A NEW Shariah-compliant index, the FTSE ST Singapore Shariah Index, has been launched by FTSE Russell and will track Shariah-compliant companies listed on the Singapore Exchange (SGX).

All constituents are screened against a set of Shariah principles, and the index will start with 48 constituents. The top ten are Singtel, Hongkong Land, Keppel, ComfortDelGro, Singapore Airlines, Singapore Press Holdings (SPH), Venture Corp, Mapletree Industrial Trust, Netlink NBN Trust and Hutchison Port Holdings Trust.

This comes as the global Islamic banking and finance industry has swelled to over US$2 trillion in assets as at end-2017, underscoring the need for appropriate asset management tools including benchmark equity indexes. 

Filtered out from the new index are companies that are involved in non-Shariah compliant activities, such as non-Islamic banking, alcohol, pork-related products, entertainment, tobacco and weapons. The remaining companies are screened to ensure they meet certain financial ratios deemed Shariah compliant. Independent screening is carried out by Yasaar, an organisation with expert Shariah scholars. 

Jessie Pak, managing director (Asia) at FTSE Russell, said: “Since FTSE Russell began calculating Shariah-compliant indexes over ten 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.”

Back in 2006, SGX partnered with the FTSE Group and Yasaar to launch the FTSE-SGX Asia Shariah 100 Index, which includes listed companies from other Asian markets. The FTSE ST Singapore Shariah Index will focus on SGX-listed firms only.

Ng Kin Yee, senior vice-president, head of market data and connectivity at SGX, added: “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.”

Wong Wei Kong, chairman of SPH Data Services, said: “Market indices must track investing trends to stay relevant, and we are glad that together with our partners FTSE Russell and SGX, we will be offering an index to meet the rising demand for Shariah-compliant benchmarks.”

FTSE Russell has partnered with SPH, publisher of The Business Times, and SGX to manage Singapore’s main stock market benchmark.

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