Shariah-compliant equities significantly outperformed in the second quarter, with the Standard & Poor’s Broad Market Index (S&P BMI) Global Shariah Index returning 3.61% against a 1.49% fall in the S&P World BMI.

The gap was particularly wide in the UK, with the UK Shariah index growing 7.32% as the parent index fell 1.38%.

The growth was attributed to the exclusion of many financial stocks which weighed down other indices. Under Islamic law, many financial insitutions are forbidden as they profit from usury or what are considered high interest rates charged on loans, while companies with debt greater than a third of the market value of their equity are also screened out.

Relative to their non-compliant equivalents, Shariah-compliant utilities companies fared best returning 8.29% globally against 3.54%. Consumer staples meanwhile fell 8.84% in the Shariah index compared to a 6.31% drop in the same sector of the World BMI.

In absolute terms energy performed best, returning 18.9%, though the World BMI saw 19.29% growth in this sector.

Aside from the financial sector, other business activities which are haraam (forbidden) include the sale of alcohol, pork, tobacco and pornography. Many sections of the media are also excluded.

The indices are screened by Kuwait-based consultants Ratings Intelligence Partners