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Thursday, 31 July 2008

South Africa: Race is on for Shariah market

Dispatch Online-2008/07/30
Business Correspondent
ISLAMIC money is moving to centre stage in South Africa as conventional banks and investment houses vie for the global Shariah-compliant market.
Absa Capital yesterday said it would be launching a Shariah Top 40 exchange traded fund (ETF) in a bid to bolster its Islamic investment product offering.
This follows the launch of the Shariah Top 40 Index by the Johannesburg Stock Exchange (JSE) – in partnership with the FTSE Group – on Monday.
There are currently eight Shariah funds in South Africa, with a net asset value of R5.93 billion, from only two in 2003 valued at R492m.
In March Absa launched SA’s first Shariah- compliant exchange traded fund, NewGold ETF, which attracted a lot of interest from the country’s 850000-strong Muslim community.
Absa’s head of ETFs and index products, Vladimir Nedeljkovic, said the bank has already lodged an application with the Financial Services Board to launch the Shariah Top 40 ETF.
Nedeljkovic said: “We believe there is quite a strong local interest in Shariah-compliant investments. We are committed to bring more Islamic products to the market.”
The FTSE/JSE Shariah Top 40 Index is a selection of Shariah-compliant companies from the FTSE/JSE Shariah All-Share Index (launched last November), with the calculation of the index and the treatment of corporate actions being similar to the FTSE/JSE Top 40.
“Internationally the market for Islamic investment products is growing exponentially, at an estimated 15% to 20% per annum,” said JSE information product sales senior general manager Ana Forssman. She said the index gave Muslim investors access to the top performing listed companies in South Africa without compromising religious beliefs.
She said the Top 40 Index was suitable for the creation of financial products, such as index funds, warrants, certificates and exchange traded funds.
Imogen Dillon Hatcher, FTSE Group’s Europe, Middle East and Africa managing director, said that with about 1.5 billion Muslims worldwide, there was huge growth potential for investment vehicles with a faith-based mandate. According to Islamic economic principles, to be Shariah-compliant, financial products must not charge interest or invest in gambling, pork or alcohol beverage industries.
Risk is shared between the customer and the investment company on agreed terms, and profit is then divided between them.
Globally the market for Shariah-compliant investment and banking is estimated at about 75bn, and growing.
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