SGX embraces FTSE ST Singapore Shariah Index

It has 48 constituents as of launch.

The Singapore Exchange welcomed the FTSE ST Singapore Shariah Index, an announcement revealed. The index is designed to to track Shariah-compliant companies listed on SGX and can be used as the basis of investment products.

The new index will utilise the FTSE ST All-Share Index as a base universe, with constituents being 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.

“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,” FTSE Russell managing director for Asia Jessie Pak said. “We look forward to working with our partners SGX and SPH as we continue to provide benchmarking, data and analytics tools for the Singapore market.”

The independent screening is carried out by Yasaar Ltd which employs 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.

Firms with activities such as conventional finance or non-Islamic banking, alcohol, pork-related and non-halal food production, entertainment related to casinos, gambling, and pornography, and those working with tobacco, weapons, arms, and defence manufacturing will be filtered out as non-Shariah compliant.

From there, the companies are screened on a financial basis wherein their debt is less than 33.33% of total assets and cash and interest-bearing items are less than 33.33% of total assets. Their accounts receivables and cash should also be less than 50% of the total assets whilst total interest and non-compliant activities income should not exceed 5% of total revenue.

“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,” SGX head of market data and connectivity Ng Kin Yee commented. “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.”

According to the Islamic Financial Services Board, global Islamic banking and finance industry has grown over the years to have more than US$2t in total assets by 2017.