FTSE and Bursa Malaysia launch sharia index
New index to replacing existing sharia benchmark in November 2007.
FTSE and Bursa Malaysia have rolled out their latest index, responding to MalaysiaÆs emergence as a hub for Islamic finance and sharia-compliant funds. The new benchmark will be known as the FTSE Bursa Malaysia EMAS Sharia Index, and is the eighth Malaysian index in the market currently run by the two parties.
For the next nine months, the new index, officially launched on 22 January, will run parallel with the Malaysian bourseÆs existing Kuala Lumpur Sharia Index (KLSI). According to Bursa Malaysia, the KLSI will be officially deactivated 1 November 2007, with the new index projected to provide superior liquidity and transparent ground rules than its predecessor.
The indexÆs components will be drawn from the FTSE Bursa Malaysia EMAS Index, which will then be liquidity screened and free float weighted by FTSE. This process will ensure the index is suitable for the creation of index-linked funds, derivatives and exchange traded funds (ETFs).
The constituents of the new index also have to pass MalaysiaÆs Securities CommissionÆs Sharia Advisory Council (SAC) screening methodology and will be reviewed by an independent committee twice a year. Under these guidelines, companies on the EMAS sharia index cannot include financial services based on riba or interest, gambling, conventional insurance, tobacco manufacturers or sellers and stock brokers in non-sharia compliant securities amongst other industries.
At face value, compliance to Sharia principles discounts some of MalaysiaÆs most liquid companies such as Maybank, British and American Tobacco (BAT) and Genting from consideration. But the indexÆs top 10 constituents include other recognisable large-cap companies, including Telekom Malaysia, Tenaga Nasional, MISC, Sime Darby and Maxis Communications.
ôThe new index provides investors with a clearer picture of quality sharia investments in the Malaysian market,ö says DatoÆ Yusli Mohammed Yusoff, CEO at Bursa Malaysia. ôIt uses globally adjusted criteria that make it easier for institutional investors to track our sharia-compliant investment offerings more effectively.ö
The launch of the new index will also provide an important step to creating more Islamic products in Malaysia, which may include the introduction of Islamic structured products in the near future.
Over the past few years, sharia funds have taken off in Malaysia. Although numbers for actual assets under management vary from source to source, Malaysia now boasts over 45 straight Islamic equity funds and around 20 balanced Islamic funds. As of April 2006, Bursa Malaysia also comprised of 871 sharia-compliant securities.
For the next nine months, the new index, officially launched on 22 January, will run parallel with the Malaysian bourseÆs existing Kuala Lumpur Sharia Index (KLSI). According to Bursa Malaysia, the KLSI will be officially deactivated 1 November 2007, with the new index projected to provide superior liquidity and transparent ground rules than its predecessor.
The indexÆs components will be drawn from the FTSE Bursa Malaysia EMAS Index, which will then be liquidity screened and free float weighted by FTSE. This process will ensure the index is suitable for the creation of index-linked funds, derivatives and exchange traded funds (ETFs).
The constituents of the new index also have to pass MalaysiaÆs Securities CommissionÆs Sharia Advisory Council (SAC) screening methodology and will be reviewed by an independent committee twice a year. Under these guidelines, companies on the EMAS sharia index cannot include financial services based on riba or interest, gambling, conventional insurance, tobacco manufacturers or sellers and stock brokers in non-sharia compliant securities amongst other industries.
At face value, compliance to Sharia principles discounts some of MalaysiaÆs most liquid companies such as Maybank, British and American Tobacco (BAT) and Genting from consideration. But the indexÆs top 10 constituents include other recognisable large-cap companies, including Telekom Malaysia, Tenaga Nasional, MISC, Sime Darby and Maxis Communications.
ôThe new index provides investors with a clearer picture of quality sharia investments in the Malaysian market,ö says DatoÆ Yusli Mohammed Yusoff, CEO at Bursa Malaysia. ôIt uses globally adjusted criteria that make it easier for institutional investors to track our sharia-compliant investment offerings more effectively.ö
The launch of the new index will also provide an important step to creating more Islamic products in Malaysia, which may include the introduction of Islamic structured products in the near future.
Over the past few years, sharia funds have taken off in Malaysia. Although numbers for actual assets under management vary from source to source, Malaysia now boasts over 45 straight Islamic equity funds and around 20 balanced Islamic funds. As of April 2006, Bursa Malaysia also comprised of 871 sharia-compliant securities.
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