THE JSE, in partnership with the FTSE Group, one of the leading global index providers, recently launched the JSE Shariah all share index and will be launching the JSE Shariah top 40 index on July 21.
The Shariah top 40 index, unlike the Shariah all share, which is a benchmark index, will be tradable.
Ana Forssman, a senior general manager at the JSE, yesterday said they had developed the index based on demand for sharia-compliant investment products and would be launching an exchange traded fund off the index by the end of September. Sharia is the body of doctrines that regulates the lives of Muslims.
The global market for Islamic investment products is growing at an annual 15%-20%, says the FTSE Group, which also predicts equity fund assets will increase from $15,5bn to $53,8bn internationally by 2010.
Ameer Amod, Cape Town-based fund manager at Futuregrowth, said there had been phenomenal growth in investor activity in the Islamic community as well as growing interest from the public who wanted “socially conscious investing”.
Forssman said although the JSE would be targeting SA’s approximately 850000 Muslims, they would be rolling out the product to the public as well.
The JSE would consider the rest of Africa as well, in line with its Africa growth strategy.
In order to be listed as sharia compliant, companies went through a screening process which filtered out those organisations involved in conventional finance, alcohol, pork-related and non-halaal food production, packaging and processing, entertainment, tobacco, and weapons.
The companies left over were screened further on a financial basis. Debt must be less than 33% of total assets, cash and interest-bearing items less than 33% of total assets, accounts receivable and cash less than 50%, and total interest and noncompliant activities income should not exceed 5% . The JSE enlisted Yasaar Research, an independent and professional sharia adviser. Forssman said the company would reassess the screening every quarter.
Seventy-five constituents made the index and have a net market capitalisation of R2,999bn. The top 10 holdings are Anglo American, BHP Billiton, Anglo Platinum, Sasol, Richemont, MTN, Impala Platinum, ArcelorMittal, Lonmin and AngloGold, and make up 80,4% of total net market share of the index.
Forssman said no financial services companies made the cut.
Of the 75 companies , 16 are mining houses, 11 are real estate companies, and six are construction and materials companies.
The JSE Shariah top 40 was based on the companies in the existing top 40 index and 22 constituents were sharia compliant. Ten of the companies are mining houses and weigh 66% of the index.
These indices will benefit investors as they are transparent because the information on the indices is published, Forssman said.
Amod said he welcomed the new indices, but Futuregrowth would continue to utilise the benchmark they had created.