Syariah Index

OBJECTIVE

The Syariah Index was launched in April 1999 to meet the demands from local and foreign investors who seek to invest in securities which are consistent with the Islamic principles of Syariah. Investors seeking to make investments based on Syariah principles now have a benchmark for making better informed decisions.

The Syariah Index is a weighted-average index with its components comprising the securities of Main Board companies which have been designated as Syariah Approved Securities by the Syariah Advisory Council (SAC) of the Securities Commission (SC).

COMPONENT STOCKS

In classifying the securities as approved securities, the SAC applies a standard criteria which focuses on the core activities of the companies listed on Bursa Malaysia. Hence, companies whose activities are not contrary to the Syariah principles will be classified as approved securities.

Securities will be excluded from the list of approved securities based on the following criteria:

1. operations based on riba (interest) such as activities of commercial and merchant banks, finance companies, etc;
2. operations involving gambling;
3. activities involving the manufacture and/or sale of haram (forbidden) products such as liquor, non-halal meats and pork; and
4. operations containing element of gharar (uncertainty) such as conventional insurance business.

As for the companies whose activities comprise both permissible and non-permissible elements, several additional criteria are applied:

5. the core activities of the company must be activities which are not against the Syariah as outlined in the first four criteria;
6. public perception or the image of the company must be good; and
7. the core activities of the company have importance and maslahah (benefit) to the Muslim Ummah (nation) and the country, and the haram element is very small and involves matters such as 'umum halwa (common plight), 'uruf (custom) and the rights of the non-Muslim community which are accepted by Islam.

Approved securities include ordinary shares, warrants and transferable subscription rights (TSRs). This means that warrants and TSRs are classified as approved securities from Syariah perspective provided the underlying shares are also approved. On the other hand, loan stocks and bonds are non-approved securities unless their issuance is based on Islamic principles.

The list of Syariah Approved Securities are updated by the SAC twice a year. Changes to the components of the Syariah Index are undertaken accordingly and reflected in the index on the effective date of change.