-   Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -    Hong Kong unveils its HK Islamic Index   -    Hong Kong's Gateway to Islamic Capitals    -     Shariah Compliance does attract more Islamic Investors    -    Arab Strategic Alliance a Positive Advantage   -   Islamic Banking & Finance a World of Emerging Opportunities   -
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Standards

The HK ISLAMIC INDEX transparent rules and governance procedures ensure that our Index is investable and straightforward to track. Our guiding principles ensure that our Index adheres to the following criteria:

Equities
  • All indices have clear rules that are publicly available and which govern index management in all foreseeable eventualities.
  • All stocks are free float adjusted.
  • All stocks meet liquidity screens.
  • All index changes are clearly communicated Further information is available in the Index rules section.
Values

Base Values and Inception Dates
The base value of the HK Islamic Index is 1000 on October 24th, 2006. Daily values are available starting from that date.

Index Eligibility
To be eligible for the HK Islamic Index, companies must first be constituents of the Hong Kong Stock Exchange. They are then screened for Shariah compliance. Only those stocks that are compliant remain in the HK Islamic Index. The final constituents are selected, once all eligibility factors are met.

Shariah Sector-Based Screens
Business activities related to the following are excluded:
  1. Advertising and Media (newspapers are allowed, sub-industries are analyzed individually)
  2. Alcohol
  3. Financials
  4. Gambling
  5. Pork
  6. Pornography
  7. Tobacco
  8. Trading of gold and silver as cash on a deferred basis
  9. Weapon manufacturing and supply
During the selection process, each company’s audited annual report is reviewed to ensure that the company is not involved in any non-Shariah compliant activities. Those that are found to be non-compliant are screened out. The above industries are not considered Islamic and would not be appropriate for investment for observant Muslims.

Accounting-Based Screens
After removing companies with non-compliant business activities, the rest of the companies are examined for compliance in financial ratios, as certain ratios may violate compliance measurements. Three areas of focus are leverage, cash, and the share of revenues derived from non-compliant activities. All of these are subject to evaluation on an ongoing basis.

Leverage Compliance.This compliance is measured as: Debt / Market Value of Equity (12 Month average) < 33 %.

Cash Compliance.There are compliances with reference to cash holdings. They are: Accounts Receivables / Market Value of Equity (12 Month average) < 49 % / Market Value of Equity (12 Month average) < 33%.

Revenue Share from Non-Compliant Activities. In certain cases, revenues from noncompliant activities are permissible, if they comply with the following threshold: Non-Permissible Income other than Interest Income) / Revenue < 5%.

Dividend Purification Ratio. This ratio is provided to investors for purification purposes, it is calculated as:
Dividend * (Non Permissible Revenue / Total Revenue)

Eligibility Factors
Market Capitalization. Stocks must have a float-adjusted market capitalization above HK$ 1 billion.


Liquidity. Stocks must have six-month average daily value traded above HK$ 5 million.


Domicile. Hong Kong and Chinese companies that list on the Hong Kong Stock Exchange.


Timing of Changes The index will be reviewed monthly for any potential additions and/or removals. A full quarterly rebalancing will only occur if the number of constituents falls below 30. Intra-quarterly rebalancings will happen only if the number of constituents is deemed to drop below 75. Removals due to corporate events or failure to comply with Shariah law will become effective preceded by a two-to-ten days notice.
  • Quarterly rebalancing will be effective on the last business day of each quarter ending March, June, September, and December.
  • Intra-quarterly changes resulting from a rebalancing will be effective after the close of the last business day of the month.
    The number of additions will be determined by the number needed to bring the list of index members backup to 70. In the case when the number of constituents remains at 70 no rebalancing will be necessary.
Additions.See above for additions resulting from quarterly or intra-quarterly rebalancings.


Deletions.
  • Removals due to failure to comply with Shariah law will be effective after the
  • close of the last business day of the month.
  • Removals due to corporate events such as mergers, acquisitions, takeovers or delistings will be made as soon as possible.
All deletions will be pre-announced at least two business days.


HK ISLAMIC INDEX Vendor Codes

Tickers
Index returns are available on most vendor platforms. Reuters and Bloomberg tickers are as follows:
Index Bloomberg Reuters
HK ISLAMIC INDEX   -   -

FTP
Daily stock level, index data and corporate action files are available via FTP by subscription.
For further information, please refer to the Bloomberg - Reuters Web sites.

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