Dow Jones has capitalised on the tremendous demand for sharia-compliant investments in Asia this year by issuing a comprehensive set of diverse and global indexes specially tailored for Asian investors. Its index launches have been nothing short of prolific and have catered to all aspects of the heterogeneous appetite of its Asian clients. The DJ Islamic Market series has been amplified with the innovative launches of not only the Islamic Market China/Hong Kong Titans Index but also the first-ever Islamic index for Sri Lanka. Additionally, Dow Jones has issued an exhaustive compendium of conventional indexes comprising select dividends, initial public offerings and real estate.
"The most telling aspect of the Asian index story this year has been the monumental demand for sharia-compliant investments," says Singapore-based Sumeet Nihalani, senior director sales, Asia-Pacific at Dow Jones. "A plethora of Muslim investors are seeking investments in line with their religious beliefs and this has fuelled the demand for sharia-compliant products and indexes."
The DJ Islamic series, created in 1999 and consisting of more than 70 indexes on a global basis, is the most recognised and all-encompassing range of Islamic indexes, a fact that is highlighted when considering that Islamic banking and finance is estimated at $300 billion and is growing at more than 15% a year, considerably faster than conventional finance in parts of Asia and the Middle East, according to Michael Petronella, president of Dow Jones Indexes and Reprints.
The most rapacious demand for sharia investments, from Malaysia, spurred the launch of the DJ Islamic Market Amana Sri Lanka index, which was created to provide investor access to a new sharia underlying but also an untapped emerging market.
The index, launched in conjunction with Colombo Stock Exchange trading company and sharia equity platform provider Amana Securities, tracks the performance of Sri Lankan companies that comply with Dow Jones's rigorous and proven sharia-based investment principles and methodology. There are 10 stocks in the index, which is weighted by float-adjusted market capitalisation, and component weights are capped at 15%. The DJ Sri Lanka Titans 20 Index was also launched, and acts as a blue-chip measure of the country's 20 largest and most liquid stocks.
"The Sri Lankan indexes provide investors not only with access to stocks suitable for Islamic investment but also the opportunity to gain exposure to an untapped emerging market with strong credentials," says Nihalani. "Asian investors are looking to diversify their portfolios and gaining access to emerging markets other than the Bric countries is highly desirable."
Another noteworthy sharia offering was the launch of the DJ Islamic Market China/Hong Kong Titans Index, which tracks the 30 largest sharia-compliant companies whose primary operations are in mainland China and Hong Kong but trade on the Stock Exchange of Hong Kong. The index, which is weighted by float-adjusted market capitalisation, comprises major companies such as China Mobile, CNOOC, Espirit Holdings and China Unicorn.
Worthy of attention too is the considerable set of innovative conventional indexes that provide access to other alternative assets. These include the DJ Stoxx Asia/Pacific 600 Real Estate index, Asia/Pacific Select Dividend 30, Asia/Pacific 600 Reits and the DJ Hong Kong IPO index. These indexes have proved to be extremely popular underlyings for structured products and exchange-traded funds.
Although investor demand for these alternative asset and sharia underlyings has been rampant in Asia this year, investor appetite for ethical and green investments has not been as strong as that of their European and US counterparts. But Nihalani believes it is only a matter of time before the trend hits Asia in a big way. "Sharia has been in vogue this year and it is expected to continue, but demand for ethical investment underlyings is definitely a future trend to look out for," he says. "Before long, enthusiasm for alternative energy, climate change and water indexes will begin to take hold."
Dow Jones will be anticipating this future trend, but has this year admirably fulfilled the demand not only for sharia indexes but also for emerging markets and other alternative asset classes such as real estate and select dividends. With more than 12,000 structured products based on its indexes globally as of September this year and with over 800 licensees around the world, Dow Jones's well-rounded and all-embracing series of indexes has proved indispensable for Asian investors.
The week on Risk.net, December 2–8, 2017Receive this by email