PSE creating new sub-index on shariah-compliant firms

After getting the results of screening by a third-party consultant, the Philippine Stock Exchange (PSE) said Monday it is creating a sub-index for 47 shariah-compliant listed companies next year to further boost liquidity and attract Muslim investors into the equities market.

 

Forty-seven listed companies with a daily market capitalization exceeding $62 billion are shariah-compliant, PSE president and chief executive officer Hans B. Sicat on Monday told reporters during a briefing in Makati City.

 

The PSE partnered with IdealRatings Inc. to screen the listed companies at the local bourse for shariah compliance in accordance with the globally accepted Accounting and Auditing of Islamic Financial Companies (AAOIFI) standards based in Bahrain. 

 

IdealRatings is a global provider of Islamic finance information.

 

Ariff Sultan, IdealRatings Asia Pacific regional director, said the AAOIFI standard is a global benchmark for Islamic investments and the list of shariah-compliant companies makes the PSE almost on a par with the global Islamic finance industry.

 

The list includes the following companies

"We think this opens up the whole asset class to... a $1.5-trillion market that can potentially be participated in... We are hoping this might drive something by 2014," Sicat said.

 

"In a way, this is like expanding the financial market of the Philippines, because it can now accommodate Muslim investors – not only those that are in the Philippines but also outside," he added.

 

Under shariah doctrine, Muslims are barred from investing in companies engaged in unethical businesses such as gambling as well as the production of alcoholic beverages and armaments.

 

"The idea of course is it makes it a lot easier for our investors, both institutional and retail, without much work on their own to basically refer to a list and be confident that such a list passes the shariah filter," he said.

 

The list of shariah-compliant firms will be updated quarterly.

 

"AAOIFI standards will basically look at the business of the company, whether they are involved in the conventional interest-based lending, financial institutions, pork, alcohol, intoxicants, tobacco, arms and weapons, gambling, casinos, derivatives, pornography, music/entertainment and human stem cell research," Sultan noted.

 

"We will also look at the financial ratios of these companies," he added.

 

To be shariah-compliant, companies should have cash and interest-bearing investments not exceeding 30 percent of market capitalization. They should also have interest-bearing debts not exceeding 30 percent and accounts receivables not exceeding 67 percent of their market capital.

 

This is the first step toward recognizing the halal quality of securities or bonds traded in the Philippines especially in the PSE, Mehol K. Sadain, National Commission on Muslim Filipino (NCMF) secretary, told reporters during the same briefing.

 

"Many Filipino Muslims go to Malaysia or put money in-house... because they are very particular about their sources of income and the profits they gain from investments... but now Muslims, even outside of the Philippines, can now go into financial investments... trading in the stock market," he said.

 

Meanwhile, NCMF chief of staff Ikram Tawasil said the introduction of Islamic capital market through the PSE is a driver to further going international.

 

"The expectation we have was for the PSE to expand... It would be viewed as a means by which we can truly globalize the Philippine economy," he added. – VS, GMA News