Thomson Reuter and Crescent Wealth launched on Wednesday
Australia's first research-based Islamic index. The index aims to
provide investors who want to build Islamic-compliant Australian
equity portfolios a powerful new tool for benchmarking.
The index, called the Thomson Reuters Crescent Wealth Islamic
Australian Index, screens companies listed with the Australian
Stock Exchange (
ASX
) for compliance with Islamic investment principles. It will
initially cover 134 securities which have combined market
capitalisation of over $160 billion.
The screening filters that the index uses exclude banks and
conventional financial stocks, firms with high level of debts or
leverage such as property trusts and other stocks that conflict
with Islamic principles. It has a dynamic bias towards resources
and energy firms and includes blue-chip stocks such as BHP
Billiton (
BHP
) and Rio Tinto (
RIO
).
Thomson Reuters, a global business information provider, and
Crescent Wealth, an Australian Islamic investment manager,
created the index to position Australia as an attractive
destination for global Islamic investment funds estimated to
exceed $1 trillion and another $50 billion managed funds that
invest in equities based on Islamic principles.
Over the years, the steady development of the Islamic capital
market (ICM) across the world positioned it as a major
counterpart to the conventional capital market. Its growth comes
at a time that the need for global funding continues to grow
making ICM products attractive to different market participants
outside its expected Muslim clients.
Islamic finance laws prohibit the earning of interest.
Instead, enterprises that comply with the Shariah law focus on
buying and selling of tangible assets such as property.
"Australian markets are stable and have attracted growth
fundamentals that Islamic investors are looking for in today's
challenging macro-environment. Using the well-documented and
objective Shariah screening process, the new co-branded index
will highlight these investments with low levels of balance-sheet
debt. It is a powerful new tool for Islamic investors to
geographically diversify their portfolios while increasing
investment opportunities into an important G-20 country like
Australia," Thomson Reuters Global Head of Islamic Finance Rushdi
Siddiqui said in a statement.
There is much wealth in the hands of Muslims, particularly
from those who come from the oil-rich Middle Eastern region as
well as businessmen from large Islamic countries that are
considered emerging economies such as Malaysia and Indonesia.
Talal Yassine, managing director of Crescent Wealth, said that
there is a huge untapped potential to further grow
Islamic-compliant investment in Australia from investors in Asia
and the Middle East.
"The investment theme reflected in the new index has broad
appeal to conventional investors beyond those driven by Islamic
principles. With its natural weighting towards low levels of debt
and leverage, an Islamic investment strategy is a sound one in
the current environment. Many companies that make up the index
carry low account receivables and a greater portion of their
funds are invested in the business rather than sitting as cash or
short-term investments," Mr Yassine said in a statement.
Crescent Wealth aims to grow up to $13 billion in funds under
its management by 2019 from a current potential pool of $8
billion.
On its first day of operation, pharmaceutical stock CSL
captured 10.1 per cent of the Islamic index, followed by Woodside
Petroleum with 9.5 per cent and Original Energy with 8.7 per
cent.
Besides the launch of the Islamic Index, the last few months
saw growth in Australia's stock market following the launch in
late 2011 of the Chi-X Stock Exchange and the addition of 29
companies to the National Stock Exchange (NSX) of Australia as
well as its offer of zero application fees.