FTSE Russell launches Shariah-compliant index on the SGX

The index which will track Shariah-compliant companies, will cater to the US$2 trillion global Islamic banking and finance industry.
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London Stock Exchange Group’s (LSEG) wholly-owned FTSE Russell, has launched a new index tracking Shariah-compliant companies listed on the Singapore Exchange (SGX).

Called the FTSE ST Singapore Shariah Index, it will begin with 48 constituents. The constituents are screened against a “clear set of Shariah principles” to create a “robust” index for the Singapore market, the press release, issued by the SGX, LSEG, FTSE Russell, and Singapore Press Holdings said.

The FTSE ST Singapore Shariah Index will sit within the FTSE ST Index Series.

Ms Jessie Pak, managing director for Asia, at FTSE Russell, said ever since FTSE Russell began calculating Shariah-compliant indexes over ten years ago, the firm has “continued to see growing demand for appropriate benchmarking tools that can be used as the basis for Shariah-compliant investment products.”

Mr Ng Kin Yee, senior vice president, head of market data and connectivity, at SGX, welcomed the FTSE ST Singapore Shariah Index to the growing suite of FTSE ST indices.

“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,” he said.

As of the end of last year, the global Islamic banking and finance industry has grown to more than US$2 trillion in total assets, according to the Islamic Financial Services Industry Stability Report 2018 issued by the Islamic Financial Services Board. This growth has been accompanied by a need for appropriate asset management tools, including benchmark equity indexes that are Shariah-compliant.

Shariah-compliant investment products are governed by the requirements of Shariah law and the principles of the Muslim religion.

The index has been certified as Shariah-compliant through the issue of a Fatwa by Yasaar Ltd's principles. Yasaar which will carry out the independent screening, is an organisation with a global network of Shariah scholars.

Companies with the following business activities such as non-Islamic banking, alcohol, pork-related and non-halal food products, dealings with tobacco, weapons, arms and defence manufacturing, will be filtered out as non-Shariah compliant.

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