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What is Islamic Market investing?
Islamic Market Investing refers to investing only in securities that meet Islamic religious guidelines. Islamic Law or Shariah prohibits investing in lines of business considered unethical.
I'm not Muslim,so I guess
this index is not for me?
Actually, Islamic indices have generated a great
interest outside of the Islamic community, due to excluding "unethical"
industries; they share many similarities with increasingly popular
social indices.
What types of businesses
are excluded from the index?
Producers of alcohol
and pork-related products, providers of conventional financial services
(banking, insurance, etc.) and providers of entertainment services
(hotels, casinos/gambling, pornography, etc...). Tobacco manufacturers,
defense and weapons companies although not all strictly forbidden
for investment under Islamic Law are excluded from the index as
well.
How does the HK Islamic
Index screen out unacceptable companies?
Stocks included in industries (defined in Industry Classification
Benchmarks) that represent lines of business that are incompatible
with Shariah are automatically excluded from the index selection
pool. The remaining stocks are then subjected to a series of financial-ratio
screens.
What are the financial-ratio
screens?
Once companies with unacceptable primary business activities have been eliminated from
the pool, the remaining stocks are tested according to three principal
"filters" designed to remove those with unacceptable financial ratios.
- Total debt divided by trailing 12-month average market capitalization.
- The sum of company's cash and interest-bearing securities divided by the trailing 12-month average market capitalization.
- Accounts receivable divided by the trailing 12-month average market capitalization.
What measures does the HK
Islamic Index take to ensure ongoing compliance with Shariah practices?
A Shariah Advisory Council and an Islamic Ethics Advisory Council
made of Islamic scholars, financial and legal experts counsel the
HK Islamic Index on matters relating to companies' compliance.
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