Lankan brokers list Shariah Compliant companies in CSE
Sri Lankan stock firms have prepared a list of Shariah Compliant securities firms in the stock market for the benefit of local and foreign investors seeking investments that follow Islamic investing principles.
“This list has been designed and developed to be used as a basis of Shariah compliant equity investments at the Colombo Stock Exchange (CSE),” an analyst told the Business Times. He said that listed companies at CSE are screened against a set of Shariah principles and the list is designed to meet the requirements of both local and foreign Islamic investors.
Shariah compliant investments have been growing in popularity, due in part to investor interest in working with the Middle East, according to analysts.
Islamic finance principles embody a unique form of investment management which corresponds with the values of socially responsible investing and LS Securities (LS), a firm that has pioneered a Islamic finance securities list two years ago, says that this is an ethical and equitable mode of finance that derives its principles from the ethical and equitable mode of finance that derives its principles from the Shariah (Islamic law).
“We’ve seen growing interest in Shariah compliant-investment products driven by the need for portfolio diversification as well as the economic attraction of Islamic investing principles,” a stockbroker said. Prominent Islamic scholars across the globe have defined all market instruments and after that they have permitted with some conditions to have investments in stock market and invest in it, according to LS, a joint venture between Pakistan’s First Capital Securities Corporation, Bank of Ceylon and Merchant Bank of Sri Lanka.
The company in its website says that while Shariah compliant investment avenues are now becoming available in most countries, Sri Lanka has not seen large-scale development. “To fill this gap, we at Lanka Securities, have designed a Shariah Compliant Securities List to assist the Islamic investors who are interested in investing at the Colombo Bourse.”
Companies involved in conventional finance (conventional banking, insurance, financial services or any other interest-related activity) will be filtered out as non Shariah compliant, LS says. In this non Shariah Compliant list, firms in areas such as alcohol, Pork related products and non-halal food production, packaging and processing or any other activity related pork and non-halal food, Entertainment (Casinos, Gambling and Pornography), Tobacco, Weapons, arms and defense manufacturing are included. Sectors such as mining, forestry and technology, etc are those which are Shariah compliant. The remaining companies are also screened in order to check for Shariah compliant accounting principles. For companies to be considered Shariah-complaint, total interest and income from non-compliant activities should not exceed 5 per cent of the total revenue, interest bearing debt is less than 30 per cent of the market capitalisation, interest earning deposits are less than 30 per cent of the market capitalisation, accounts receivable, prepayments and cash should be less than 50 per cent of the total assets.
“The list is prepared based on all the companies currently listed in the CSE. When a new company gets listed in the CSE it will be added to the list if it meets the above set criteria,” LS says.
As several financial ratio screeners are based on the market capitalisation, the list will be reviewed on a weekly basis to capture the impact of the price movements of the equities, according to LS officials. They said that the financial data on which the list is based on will be updated quarterly when the companies release the interim financials.
The screening methodology is designed to ensure the compliance with the Shariah laws, LS says, noting that the business and financial screens have been identified looking at the industry best practices along with the guidance set by the Accounting and Auditing Organisation for Islamic Financial Institutions.
| Shariah Compliant companies in CSE
1) Colombo Land & Development Co. Plc 29) Raigam Wayamba Saltern Plc |
Central Industries PlcFollow @timesonlinelk
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