Dow Jones Indexes, a global index provider, has launched the Dow Jones Islamic Market (DJIM) Greater China Index. The index measures the performance of companies in mainland China, Hong Kong and Taiwan that have passed screens for Shari’ah compliance.
To determine their eligibility for the Dow Jones Islamic Market Indexes, stocks are screened based on their industry type and their financial ratios. Excluded are companies engaged businesses like alcohol, tobacco, pork-related products, financial services, defense/weapons and entertainment. Also excluded are companies for which the following financial ratios are 33% or more – debt divided by trailing 12-month average market capitalization, cash plus interest-bearing securities divided by trailing 12-month average market capitalization and accounts receivables divided by trailing 12-month average market capitalization.
The index is designed to serve as underlying for financial products such as exchange-traded funds (ETFs) or as a benchmark for mutual funds. The index is licensed to Prudential Fund Management Berhad, the Malaysia-based regional Islamic hub for the global Prudential network, to be used as the benchmark for Prudential Dinasti Equity Fund.
According to the Dow Jones Indexes, the US dollar denominated Dow Jones Islamic Market Greater China Index is free-float market capitalization weighted. The total weight of all Taiwanese companies is capped at 30% of the index and each component’s weight is capped at 10% of the index. The company has added that the index composition is reviewed quarterly in March, June, September and December. The index is also reviewed on an ongoing basis to account for corporate actions such as mergers, de-listings or bankruptcies.
Michael Petronella, president of Dow Jones Indexes, said: “Expanding the Dow Jones Islamic Market index series to the Greater China region enables market participants to track the performance of leading Shari’ah compliant companies in one of the most dynamically evolving regions worldwide. While China, Hong Kong and Taiwan are markets in different developmental stages with different economic characteristics, they share a common, robust business culture. That along with expectations for long-term growth and market demand were important factors in our introduction of the Dow Jones Islamic Market Greater China Index.”
Mark Toh, regional head of Islamic fund management at Prudential, Asia, and chairman and acting CEO of Prudential fund management Berhad, said: “When we first realized there was a gap in the current marketplace where no index could provide us with a fitting measure of Shari’ah compliant equities in the Greater China region, we approached Dow Jones Indexes to create one because we recognize Dow Jones Indexes as one of the global leaders in indexes. We have worked with them before, and we trust their expertise.”
