Standard & Poor's has launched a fully investable GCC Shariah Index which has been designed to capture the largest and most liquid stocks across the GCC, paving the way for the creation of mutual funds, ETF's and structured products across the Gulf's highly concentrated equity markets.
The new indices - S&P Saudi Shariah, S&P Bahrain Shariah, S&P Kuwait, Shariah, S&P Oman Shariah, S&P Qatar Shariah, S&P United Arab Emirates Shariah - in addition to a S&P GCC Investable Shariah and a S&P GCC Composite Shariah Index - include only those stocks which comply with Shariah-law.
Alka Banerjee, Vice President of Standard & Poor's Index Services, said a growing pool of petrodollars, high financial sophistication among Muslim investors, and a greater desire to invest in compliance with religious norms was fuelling the explosive growth of Islamic financial products.
'A lack of globally accepted benchmarks and other tailored investment tools is constraining the development of Shariah-related equity investing around the world,' Ms Banerjee said. 'Together, these new S&P Shariah indices will provide Islamic investors and asset managers with a rigorous and consistent set of benchmarks and offer product providers the opportunity to develop structured products tailored to the Islamic market, while drawing on the liquidity and investability of S&P indices.'
The S&P Shariah indices have been screened by Ratings Intelligence Partners, a Kuwait-based consulting company specialising in the Islamic investment market, whose Islamic researchers work directly with the Shariah Supervisory Board. The Board comprises a group of Islamic scholars whose role is to interpret business issues and recommend actions related to the indices.
The indices exclude businesses that offer products and services that are considered unacceptable and non-compliant according to Shariah law, such as stocks of companies that operate in alcohol, entertainment, financial services, pork-related products, and tobacco, as well as companies whose financial ratios may violate the compliance measure. All index constituents are evaluated on an ongoing basis to ensure the indices maintain strict Shariah compliance.
They complement Shariah-compliant versions of Standard & Poor's widely used global benchmark indices, the S&P 500, S&P Europe 350 and S&P Japan 500, launched in 2006. Both groups of Shariah indices are designed to be closely correlated with the underlying index, while adopting explicit investment criteria defined by Shariah law.