From Shahed Amanullah:
shahed@ricochet.net

What can I say? Money talks...
shahed 

Dow Jones Plans to Launch Islamic Equity-Market Index

SARA WEBB
Staff Reporter of THE WALL STREET JOURNAL

February 8, 1999

 Dow Jones & Co., publisher of The Wall Street Journal and Interactive Journal, is launching a new global equity-benchmark index aimed at investors who follow Islamic investment guidelines.

 The new index -- called the Dow Jones Islamic Market Index, or DJIM -- currently tracks 600 companies whose products and services don't violate Shari'ah law. Companies in the index aren't just from Islamic countries, but from 30 countries around the world, including the U.S.

 The creation of the index reflects a growing interest by individuals in making investments that adhere to ethical guidelines, according to their beliefs. Over the years, many funds have avoided certain categories of stocks -- for example, tobacco stocks, or shares in defense companies, or stock in companies that did business in South Africa during the period when that country practiced apartheid.

 Institutions and individuals who invest in companies that are in the Dow Jones Islamic Index can be assured that their investments don't transgress religious law; in addition, the index provides a yardstick against which investors can measure the performance for existing Islamic mutual funds.

 "Presently there is no Islamic benchmark index provided by an established index provider," says A. Rushdi Siddiqui, director of Dow Jones' Islamic Index Group, who estimates that perhaps as much as $8 billion is invested in stocks that meet Islamic religious guidelines.

 In keeping with Shari'ah law, the index excludes companies whose products include alcohol, pork, tobacco and weapons; firms in the entertainment business (such as hotels, casinos and cinemas); and those in the conventional financial-services industry, such as banking and insurance, that collect interest, which is in violation of Islamic law. The index also screens out companies with unacceptable financial ratios, such as high debt levels.

 As a result of the screening techniques, the DJIM index is heavily weighted in the U.S., at nearly 70% of the index, and consists mainly of stocks in the consumer, technology, utility, energy and industrial sectors.

 Investment practices vary widely in the Islamic world. One of the best-known Saudi Arabian investors, Prince Alwaleed bin Talal bin Abdulaziz Al-Saud, owns big stakes in financial-services giant Citicorp, as well as in the alcohol-serving restaurant chain Planet Hollywood International. In some of the more liberal Moslem countries, such so-called sin stocks even trade on the domestic stock exchanges. For example, Indonesian cigarette companies and banks trade on the Jakarta stock exchange, while Malaysia's stock market lists several gaming companies.

 Traditionally, Islamic investors have tended to use leasing and financing agreements as their main investment vehicles rather than listed company shares. "Islamic financing and leasing is very big," says Nic Contomichalos, head of Dresdner Private Banking in London, a unit of Dresdner Bank. But, he adds, there is increasing interest in equity investing according to Islamic practices.

 Dow Jones has issued a license to Brown Brothers Harriman & Co. and Wafra Investment Advisory Group, which is a wholly owned subsidiary of Kuwait's Public Institution for Social Security, to create tradeable funds based on the Dow Jones Islamic Market Index.

 The inclusion in the index of many companies in the U.S. and the exposure to certain sectors has helped the DJIM index outperform other standard global indexes in the past couple of years -- although it has still under-performed the U.S. market.

 If you take "a snapshot of the last couple of years, the growth has been in telecoms and technology and utilities," says Ms. Shahrzad Khayami, a senior portfolio manager at Citibank Global Asset Management in New York, suggesting that this is one reason why the index has performed relatively well over that period. "But as far as I'm concerned, it's a matter of the economic cycle. Over a long period of time it really doesn't matter."

The preceding document was posted on AMILAnet - a service of American Muslims Intent on Learning and Activism (AMILA) San Francisco Bay Area
http://www.mpac.org/amila

Opinions expressed in the above post are those of the author and do not necessarily reflect the official views of AMILA

subscribe: send e-mail with "subscribe amilanet" to amila@mpac.org
unsubscribe: send e-mail with "unsubscribe amilanet" to amila@mpac.org