The Hindu Business Line : S&P launches Shariah compliant indices

Standard & Poor's today launched Shariah-compliant versions of its widely used global indices, the S&P 500, S&P Europe 350 and S&P Japan 500. This initiative is expected to create new opportunities for Islamic investors to benchmark their international investments and for asset managers to create new investment products serving the Islamic community.

The new indices - the S&P 500 Shariah, S&P Europe 350 Shariah and S&P Japan 500 Shariah - have been created by screening stocks in the parent indices for compliance with Shariah law, a release said.

The Shariah versions of the indices are designed to be closely correlated with the underlying index and provide investors with a comparable investment portfolio, while adopting explicit investment criteria defined by Shariah law.

According to Ms Alka Banerjee, Vice-President of Standard & Poor's Index Services, "Potential growth in Shariah-related investing around the world is enormous, but has been held back by a lack of globally accepted benchmarks and other tailored investment tools. The new S&P Shariah indices will provide Islamic investors, and the institutions that serve them, with a rigorous and consistent set of international benchmarks. In addition, these indices offer product providers with the opportunity to create structured investment products tailored to the Islamic market, while drawing on the liquidity and investability of S&P indices and their widely respected GICS global sector classifications."

The S&P Shariah indices have been screened by Ratings Intelligence Partners, a Kuwait-based consulting company specialising in the Islamic investment market, whose Islamic researchers work directly with the Shariah Supervisory Board. The Board comprises a group of Islamic scholars whose role is to interpret business issues and recommend actions related to the indices.

The indices exclude businesses that offer products and services that are considered unacceptable and non-compliant according to Shariah law, such as stocks of companies that operate in alcohol, defence/weapons, entertainment, financial services, pork-related products, and tobacco, as well as companies whose financial ratios may violate the compliance measure.

All index constituents are evaluated on an ongoing basis to ensure the indices maintain strict Shariah compliance.

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