Shariah-compliant index series bound for Singapore

The FTSE Group (FTSE) has announced it will offer a Shariah Index Series in partnership with the Singapore Exchange (SGX) and Yasaar Research. The group expects to launch the first index of the series, the FTSE SGX Asia Shariah 100 Index, in February 2006.

Singapore is clearly trying to tap into the growing demand for Islamic financial instruments, which under Shariah law prohibit the payment of interest.

"This collaboration with FTSE and Yasaar Research is the first global Islamic initiative," says Hsieh Fu Hua, CEO of SGX. "It represents a further step in enhancing our comprehensive product suite to meet the increasing demand for Islamic banking and finance."

The new FTSE SGX Shariah Index Series will be comprised of stocks screened for Shariah-compliance using Yassar Research's screening methodology, which is backed by a panel of Shariah Scholars. This means the index will exclude companies that primarily focus on gambling, tobacco, or alcohol. The indices will be free-float adjusted and will be based on the Industry Classification Benchmark (ICB).

"The availability of such a set of Shariah-compliant indices that can be used by SGX will contribute to the development of new Islamic financial products in Singapore," says Heng Swee Keat, managing director of the Monetary Authority of Singapore. "This will add to the range of products available to global investors including those from the Middle East, who may be keen on Shariah-compliant investments in Asian markets."

Middle Eastern investors have been increasingly looking for investment opportunities in keeping with their religious principles. Muslims, led by Gulf Arabs, hold about $1.5 trillion of asets, an amount that is growing at about 15% a year. As a result, Asia has been offering a host of investment opportuniest -- from sukuks, or Islamic Bonds in Malaysia to this index in Singapore.