KUWAIT, 1 October 2006 — Global Investment House (Global) yesterday launched its new GCC Islamic Index, part of Global’s series of indices, leveraging the need to track the performance of Shariah-compliant companies in the region.
Omar M. El-Quqa, CFA, executive vice president at Global, said, “We take pride in introducing the first dedicated Islamic Index for the GCC region. Global GCC Islamic Index establishes itself as the benchmark for Shariah-compliant investment in GCC countries, introducing the immense Shariah-compliant investment opportunities available in our regional market.”
“Islamic finance has become one of the most dynamic growth areas in international finance. This new index leverages the need for tracking the performance of Shariah-compliant stocks in-line with the great interest the investors are showing in this market,” he added.
Muslim societies have always looked to means of conducting their banking and investment affairs according to the Shariah. Today, there seems to be a growing interest in Islamic finance even in such parts of the globe as Europe and North America, where Muslims are a minority. Moreover, in the Middle East, Islamic Finance may become a way of life.
A recent study illustrates that the Asia-Pacific region looks promising as well, following estimates that Islamic banks will account for 40 to 50 percent of total savings of the Muslim population worldwide within the next eight to ten years.
Financial reports of all listed GCC companies have been screened for Shariah-compliance, and only those companies engaged in business in conformity with the principles of Islamic Shariah were included.
As for what qualifies as a Shariah-compliant stock, El-Quqa said: “Islamic institutions are those that are based, in their objectives and operations, on Shariah principles. They are thus set apart from “conventional” institutions, which have no such preoccupations.” “For this index, the company’s article of association has to mention that all financial activities are governed by Shariah-complaint principles.”
“Hence, Global composed a special index to track the performance of the Islamic Shariah compliant companies under the name of “Global GCC Islamic Index.” The index tracks the performance of those companies as a distinctive and integral part of the GCC region as a whole,” El-Quqa added.
Such an index should help in enhancing the market, as it will work side-by-side on developing more interest among foreign and local investors that are targeting Islamic compliant companies and direct them toward those stocks, he said.
Global GCC Islamic Index comprises all Shariah-compliant stocks listed on all GCC bourses, currently totaling 66 companies.
The market capitalizations of the companies included in the index are converted into dollars using the applicable exchange rates. The index is maintained according to a transparent methodology that is consistent with that of the Global Kuwait Stock Exchange Indices, i.e. a 100 percent market capitalization weighted index following the formulae of the International Finance Corporation (IFC).
Inception of Global GCC Islamic Index goes back to Dec. 31, 1999 (Base=100). Adjustments according to corporate actions are made as they occur.
El-Quqa pointed that, “in the future, newly listed companies on the stock markets that meet Shariah compliance criteria, will be added to the index on listing date to ensure that the index reflects the actual market conditions.”