Standard & Poor’s, a leading index provider, has launched three new benchmark indices designed to help investors track the performance of a global universe of more than USD20trn in Sha
Standard & Poor’s, a leading index provider, has launched three new benchmark indices designed to help investors track the performance of a global universe of more than USD20trn in Shariah-compliant equities.
‘The launch of these new global indices underlines the commitment of Standard & Poor’s to providing Islamic investors with the widest possible universe of investment options that have been screened for Shariah compliance, and equipping them with the tools they need to quantify their performance,’ says S&P vice-president for index services Alka Banerjee.
‘Islamic investors are increasingly looking for exposure beyond their local markets in the Middle East and Asia, and the Standard & Poor’s Shariah index series provides them with the ability to slice and dice an expanding array of countries and regions by size, style and sector.’
The three new indices – S&P LargeCap World Shariah, S&P SmallCap World Shariah and S&P UK Shariah – cover 26 developed markets and join Standard & Poor’s growing line-up of sector, region and strategy Shariah indices developed for investors seeking to abide by Islamic law.
The S&P LargeCap World Shariah and S&P SmallCap World Shariah together measure the performance of more than 4,500 Shariah-compliant equities with an adjusted market capitalisation of USD18.05trn from 26 developed markets: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, UK and US. The S&P UK Shariah Index comprises 301 UK-domiciled companies with an adjusted market capitalisation of USD1.98trn.
All three indices are derived from the S&P/Citigroup BMI World index, constituents of which must have a float market capitalisation of more than USD100m, and a minimum annual value traded of at least USD50m.
Standard & Poor’s Shariah indices are screened by Ratings Intelligence Partners, a Kuwait-based consulting firm specialising in the Islamic investment market whose researchers communicate directly with a Shariah supervisory board. The board comprises a group of Islamic scholars who interpret business issues as well as financial practices and recommend actions and how they affect the Shariah index.
S&P Shariah indices undergo sector and accounting-based screens that exclude businesses that offer products and services which are considered unacceptable or non-compliant according to Shariah law, such as advertising and media (newspapers are allowed, sub-industries are analysed individually), alcohol, financials, gambling, pork, pornography, tobacco, and the trading of gold and silver as cash on a deferred basis. All index constituents are monitored daily to ensure that the indices maintain strict Shariah compliance.
Standard & Poor’s is the leading provider of financial market intelligence to customers in the Gulf Co-operation Council’s credit risk management, wealth management, and data and information markets. It is the largest provider of credit ratings in the Gulf, rating more than 100 issuers.
In equity markets, Shariah-compliant versions of Standard & Poor’s global and regional equity market indices – the S&P 500, S&P Europe 350, S&P Japan 500 and S&P/IFCI GCC – offer benchmarks for Islamic investors and a basis for investment products serving the Islamic community.