The new product will trade on theSingapore stock exchange (SGX) and should launch within the next few months.Shariah-compliant ETFs are a rarity-one is listed on the Swiss stock exchange,SWX, tracking the Dow Jones Islamic Titans 100 Index.
But while Islamic ETFs are ararity, Islamic indexes have proliferated in the past several years, with allof the major index providers launching their own families; a response in partto rising wealth in the Middle East. The DaiwaETF's underlying index is actually the first to be launched in what will be abroad family of Shariah-compliant FTSE indexes that encompass 23 countries aswell as regional indexes, including developed and emerging designations. Although FTSE has previously partnered withother firms to launch smaller families of Shariah-compliant indexes, this is acomprehensive and independent undertaking.
"There's a general trend of MiddleEastern investors wanting to invest in Asia," says FTSE spokesperson Jill Sheain explaining why the Japan index was the first to launch.
The FTSE Shariah Japan 100 Index has a strong weighting ofnearly 20% in Automobiles & Parts. The next largest sector is TechnologyHardware & Equipment at slightly more than 11%. The top five componentsinclude Toyota Motor Corp. (13.81%), Canon (6.30%), Matsushita ElectricIndustrial (3.91), Takeda Pharmaceutical (3.47%) and Nippon Steel (2.90%). Thetop ten components represent more than 41% of the index's total marketcapitalization.
As with most Shariah-compliant indexes, the methodologyexcludes companies with involvement in lines of business involving alcohol,tobacco, pork products, conventional finance, weapons and entertainment.Companies must also meet certain financial ratio requirements regarding debt,interest income, noncompliant income, cash and accounts receivable.