SYDNEY - The international financial services information company Thomson Reuters and Australia's first Islamic wealth manager have launched an Islamic index that will offer investors means to build an Islamic-compliant Australian equities portfolio.
Australian markets are stable and have attractive growth fundamentals that Islamic investors are looking for in today's challenging macro-environment, said Rushdi Siddiqui, Thomson Reuters global head of Islamic finance and OIC Countries, The Muslim Village reported on Friday, February 3.
The Islamic index, announced by Thomson Reuters and Crescent Wealth last February 1st, is the first benchmarking tool used in the Australian market.
The index would screen Australian Securities Exchange-listed companies for compliance with Islamic investment principles.
Starting its work, it will initially span 143 securities with a combined market capitalization of more than $160 billion.
The index, however, excludes banks, conventional financial stocks and companies with high levels of debt or leverage.
According to Crescent Wealth, compliant companies are reviewed on a quarterly basis for continued compliance with the Accounting and Auditing Organization for Islamic Financial Institutions standards.
Siddiqui expects the Islamic investment sector will grow to as much as $13 billion in funds under management by 2019.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.
Transactions by Islamic banks must be backed by real assets, not shady repackaged subprime mortgages.
Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.
Government surveys show that Australia is home to 365,000 Muslims, who would use Islamic financial services if they were more accessible.
Offering low-risk investments, Crescent Wealth managing director Talal Yassine said that the index will help to sell the Australian Islamic investment proposition to investors abroad.
There is a huge untapped potential to grow Islamic-compliant investment in Australia from investors here and in Asia and the Middle East, he said.
Yassine added that the investment theme of the index has broad appeal to conventional investors, particularly those with an ultra-ethical' investment strategy.
Last year, the Crescent Australian Equity Fund (CAEF) was issued, aiming at allowing Australians to tap into the $1.4 billion Islamic investment market.
Islamic banks have proved a success because of rules that forbid investing in collateralized debt obligations and other toxic assets that cause financial crises.
The Islamic banking system is being practiced in 50 countries worldwide, making it one of the fastest growing sectors in the global financial industry.
Starting almost three decades ago, the Islamic banking industry has made substantial growth and attracted the attention of investors and bankers across the world.
A long list of international institutions, including Citigroup, HSBC and Deutsche Bank, are going into the Islamic banking business.