Islamic Banking

STOXX Launches Islamic Indices

Nick Parmee, 24 February 2011

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Zurich-based STOXX has launched the STOXX Europe Islamic Index and two blue-chip sub-indices, the STOXX Europe Islamic 50 and EURO STOXX Islamic 50. The three new indices measure the performance of Shariah-compliant companies selected from the STOXX Europe 600 Index.

All three are designed to act both as a benchmark for actively managed funds and to underlie exchange-traded funds and other investable products that enable investors to participate in the performance of European companies which are in line with the moral and social doctrines of Islam.

The index universe for the STOXX Europe Islamic Index is all stocks in the STOXX Europe 600 Index. To be included, stocks must pass two sets of screens.

First, all companies with significant activity in one of the following sectors or activities are removed: non-halal food production; tobacco; alcohol; gambling; advertisement; hotels; non-Islamic banks, financial institutions and insurance companies; entertainment and music production; trading of gold and silver, as well as weaponry and arms manufacturers.

Secondly, the financial ratios of the remaining companies are screened: income from interest and non-Shariah compliant activities cannot exceed 5 per cent of the company's total income. Furthermore, the ratio of non-Shariah-compliant debt to either the company's total assets or total market capitalisation - whichever is greater - cannot exceed 33 per cent. In addition, the total ratio of interest-bearing assets to the company's total assets or total market capitalisation can also not exceed 33 per cent.

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