The Philippine Stock Exchange (PSE) is drawing up a list of Shariah-compliant equities to attract the nation’s Muslim investors and $1.2 trillion of investible funds in the Middle East.
The exchange is holding consultations and workshops with the Al-Amanah Islamic Investment Bank of the Philippines, government agencies and the Asian Development Bank on standards for Shariah-compliant stocks, Leo Quinitio, head of the bourse’s capital-markets development division, said in an interview.
“There’s a large pool of investible funds in the Middle East that invest only in Shariah-compliant stocks or companies that meet Muslim doctrines,” Quinitio said in Manila yesterday. “We are working on this and hopefully by the first half we will have a list.”
The Philippine Stock Exchange has sought to introduce new products, including real estate investment trusts and exchange traded funds, to boost trading in Asia’s 12th-largest stock market. The nation’s equities have a market value of $209 billion, or about equal to Nestle SA (NESN)’s capitalization, according to data compiled by Bloomberg,
Trading on the Philippine stock exchange has averaged 5.86 billion pesos ($141 million) a day this year, 22 percent more than 2011’s average, the data show. The Dow Jones Islamic Market World Index (DJIM) of companies that meet Islamic guidelines has surged 13 percent this year, outpacing an 8.3 percent gain by the MSCI Asia Pacific Index.
NO ALCOHOL
Quinitio said Muslims are restricted from investing in companies that violate Shariah doctrines, which forbid the engagement in activities deemed unethical such as gambling, production of alcohol and armaments. There are also restrictions on interest-related income, he said.
Apple Inc., Exxon Mobil Corp. and PetroChina Co. are the three biggest Shariah-compliant companies by market value that Muslims can invest in, according to data compiled by Bloomberg.
Drawing up a list of Shariah-compliant stocks can be “very difficult,” according to Abdul Jalil Abdul Rasheed, chief executive at Kuala Lumpur-based Aberdeen Islamic Asset Management.
“One of the challenges is how detailed do they want the standards to be and this can make the work intensive,” Rasheed said. “Do you want it to be 100 percent compliant or have a tolerance level of say 5 percent of earnings come from non-halal business? The other challenge is do you want the financing of the business to be shariah-compliant as well?”
OVERSEAS BUYING
The Philippine exchange is working with the National Commission for Muslim Filipinos to form a Shariah advisory council, Quinitio said.
“There are no signs so far that investors’ interest in the Philippines has waned,” he said. “The market is enjoying a good momentum.”
Overseas investors bought a net $2.19 billion of Philippine equities this year to Sept. 20, compared with $1.33 billion of purchases for all of 2011. The benchmark Philippine Stock Exchange Index (PCOMP) has rallied 21 percent this year and closed at a record on July 5 amid optimism about the nation’s economic growth prospects.
The $1.3 trillion Shariah-compliant finance industry is expanding globally at an average annual rate of 15 percent, according to a June report from Malaysia’s Securities Commission. The Islamic Financial Services Board in Kuala Lumpur predicts the market will reach $2.8 trillion by 2015.
Islamic assets account for about 1 percent of global financial market, according to a March 2012 publication of the UK Islamic Finance Secretariat. The largest centers remain concentrated in Malaysia and the Middle East, including Iran, Saudi Arabia, United Arab Emirates, Kuwait, Bahrain and Qatar, according to the report.
(Bloomberg / 21 Sep 2012)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
