Corporate News

By Mikhail Franz E. Flores, Reporter

Shariah subindex launch pushed back to mid-2015

Posted on December 09, 2014

A PHILIPPINE Stock Exchange (PSE) launch of a new subindex for Shariah-compliant listed companies planned for this quarter will be delayed until mid-2015, PSE President and Chief Executive Officer Hans B. Sicat said.

FILIPINO Muslims observe the first day of the Holy Month of Ramadan at a mosque in Quiapo, Manila in this photo taken in 2008. The Philippine Stock Exchange hopes to attract wealthy Muslims to invest in stocks that are compliant with Islamic laws, which ban making money from alcohol, tobacco, and gambling, among others. -- BW FILE PHOTO
“We’re hoping to introduce it this December while we’re doing so many other things. Again, that’s just time running out,” Mr. Sicat said on the sidelines of an event in Makati City Friday last week.

The local stock exchange may introduce the Shariah subindex “maybe by the first half of next year”, the PSE chief said.

The subindex will comprise publicly listed companies that comply with Islamic laws, which limit the kind of investments that wealthy Muslims can make a profit from.

As of July, 51 out of 296 listed firms have been found Shariah-compliant, down from the 61 cited in April.

Mr. Sicat said only some of those Shariah-compliant companies will make it to the subindex.

“To make up the index would be a slightly smaller number because clearly you need to have some liquidity measures for the index outside of just qualifying,” the PSE official said.

The move to create a Shariah subindex is expected to boost liquidity by encouraging the entry of Islamic funds and enable the local stock exchange to catch up with regional peers.

To be Shariah-compliant, a company’s primary business should not be involved in conventional interest-based lending, insurance, mortgage and leasing, derivatives, pork, alcohol, tobacco, arms and weapons, embryonic stem cell research, hotels, gambling, casinos, music, cinema and adult entertainment.

The restrictions are softened somewhat such that if a company makes money from those activities but the share to total revenue does not exceed 5%, the company can still qualify.

Also, interest-bearing debt as well as interest on deposits and investments should not exceed 30% against the company’s 12-month average market capitalization.

Accounts receivables should likewise not exceed 67% against the 12-month average market capitalization.