New Delhi: Eleven Indian companies have made it to Standard & Poor’s new Islamic index covering stocks drawn from Asian country indices in its S&P Citigroup Global Index Series. These are: Tata Consultancy Services, Infosys Technologies, Wipro Corporation, Bharat Heavy Electricals (BHEL), Oil and Natural Gas Corp., Bharti Televentures, Hindustan Lever, National Thermal Power Corp., Reliance Industries, Reliance Communication and Satyam Corp.
The nine countries in the S&P Pan Asia Shariah Index are India, China, Hong Kong, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. Australia, New Zealand and Japan have been excluded.
The index, the latest addition to the S&P Global Shariah Series, will allow those who adhere to the Shariah to invest in Asian companies whose businesses do not contradict the tenets of Islamic law, while simultaneously giving an opportunity to financial services providers to evolve products catering specifically to this segment.
An S&P release says stocks for this universe must have at least $1 billion in float-adjusted market capitalization. The number of stocks, for Shariah screening purposes, is limited to the top 15 from each country. Each month a universe of stocks conforming to these criteria, selected once a year on 31 March, is screened for Shariah compliance to form this index.
The S&P Pan Asia Shariah Index has been launched with 71 companies with a market capitalization of $810.83 billion. Information technology companies represent approximately 35% of the index, followed by telecom services (17%) and energy (15%).
S&P officials told this correspondent via email that companies featuring in the index include Tata Consultancy Services, Hyundai Motor Co, China Mobile, Samsung Electronics, among others. They, however, declined to give details on the weights these companies enjoyed.
The S&P Global Shariah Index Series already offers Shariah-compliant versions of Standard & Poor’s widely used global indices — the S&P 500, the S&P Europe 350 and the S&P Japan 500 — as well as the S&P GCC Middle East Shariah Index Series and the S&P BRIC Shariah Index.
All S&P Shariah indices are screened by Ratings Intelligence Partners, a Kuwait-based consulting company that specializes in Islamic investments. Ratings Intelligence researchers work directly with a Shariah Supervisory Board consisting of Islamic scholars serving to interpret business issues and recommend actions related to business decisions for the indices.
All S&P Islamic indices typically cover 60% of the market capitalization of parent indices. While this can vary depending on the number of companies found to be compliant, S&P says historical performance analysis indicates a high degree of correlation between the underlying indices and the Shariah indices.
S&P Shariah Indices exclude businesses that offer products and services found unacceptable according to Shariah. These include advertising and media (newspapers are allowed, sub-industries are analyzed individually), alcohol, financials, gambling, pork, pornography, tobacco, and trading of gold and silver as cash on a deferred basis.
A company that clears the first set of filters is then examined for compliance in financial indicators. S&P’s leverage compliance, for instance, stipulates that a company’s debt minus cash as a percentage of debt plus the 12-month average market value of equity should be less than 33%.
All S&P Shariah Index constituents are monitored on a daily basis to ensure strict compliance with the Shariah.