JSE launches Shariah investment index

21 July 2008

The JSE has partnered with the FTSE Group to launch the FTSE/JSE Shariah Top 40 Index, opening up opportunities for those - including South Africa's 850 000-strong Muslim community - interested in Shariah-compliant investment.

The FTSE/JSE Shariah Top 40 Index is a selection of Shariah-compliant companies from the FTSE/JSE Shariah All-Share Index, with the calculation of the index and the treatment of corporate actions being similar to the FTSE/JSE Top 40.

"Internationally the market for Islamic investment products is growing exponentially, at an estimated 15-20% per annum," the JSE's Ana Forssman said in a statement this week.

"This index gives Muslim investors access to the top performing listed companies in South Africa without compromising their religious beliefs."

Huge growth potential

The FTSE/JSE Shariah Top 40 Index is suitable for the creation of financial products, such as index funds, warrants, certificates and Exchange Traded Funds.

"With approximately 1.5-billion Muslims worldwide, there is huge growth potential for investment vehicles with a faith-based mandate," said FTSE Group Europe, Middle East and Africa MD Imogen Dillon Hatcher, adding that Shariah-compliant investment was one of the fastest growing new areas of finance globally.

"The FTSE/JSE Shariah Top 40 index will provide institutional investors with an accurate Shariah benchmark as well as help providers create structured investment products tailored to the Islamic market," she said. "Today's launch demonstrates FTSE Group's commitment to providing innovative solutions to investors both in South Africa and worldwide."

Complying with Shariah law

The constituents of the FTSE/JSE Shariah Top 40 Index are screened by Yasaar Research, a well-respected authority on Shariah law.

To qualify as a constituent of the index, companies undergo a detailed screening process, which filters out any organisations considered unacceptable or non-compliant according to Shariah-law, including businesses involved in conventional finance, alcohol, pork-related and non-halaal food, entertainment, tobacco and weapons.

The remaining companies are then further screened according to Shariah-compliant financial criteria. In order to remain in the index, the companies are reassessed by Yasaar quarterly.

SAinfo reporter