Shariah-Compliant
ETF
WHAT IS SHARIAH-COMPLIANT ETF?
An index that tracks stocks that comply with Shariah requirements.
Shariah compliant stocks are those that has passed the
Industry type: Excluded companies that represent lines of business comprising
alcohol, tobacco, pork-related products, conventional financial services, defence/weapons,
entertainment not permissible by Shariah and any other activities deemed non-permissible by the
Shariah
For companies with mixed contribution from Shariah permissible and
non-permissible activities, they are deemed Shariah-compliant should the following thresholds are
complied with:
- Income from activities which are clearly prohibited (like conventional financial business,
insurance, gambling, pork and alcohol is less than 5% of total turnover (TO) and profit before tax
(PBT);
- Mixed rental income from Shariah non-compliant activities (like rental payments from premises
used in gambling, sale of liquor) is less than 20% of total TO and PBT
-
- Interest income from fixed deposits and income from tobacco business is less than 10% of total
TO and PBT;
-
- Income from hotel and resort business, sharetrading and stockbroking of Shariah non-compliant
stocks is less than 25% of total TO and PBT.
Financial ratios: Excluded companies whose percentage ratio is 33% or more for
the following:
Total debt divided by trailing 12-month average market capitalization;
Cash plus interest bearing securities divided by trailing 12-month average market
capitalization;
Accounts receivables divided by trailing 12-month average market
capitalization.
WHY INVEST IN SHARIAH-COMPLIANT ETF?
TRADE LIKE STOCKS
Can buy and sell on real time basis throughout the trading day.
AN ALTERNATIVE TO CONVENTIONAL ETFs
The alternative avenue for investors seeking a Shariah-compliant
instrument.
FULLY TRANSPARENT
The investment portfolio is fully transparent as it tracks a public
index.
EFFICIENT WAY TO DIVERSIFY
Easy access to a basket of Shariah-compliant securities in one
single transaction.
Lower cost compared to managed funds.
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