Indo Premier Investment Management launches republic’s first Shariah compliant ETF (By IFN)

Indo Premier Investment Management launches republic’s first Shariah compliant ETF

Daily Cover

INDONESIA: One of Indonesia’s largest securities firms, the Jakarta-based Indo Premier Investment Management (IPIM) which has over IDR350 billion (US$35.91 million) in equity capital, has launched the country’s first Shariah compliant exchange-traded fund (ETF) — the Premier ETF Syariah Jakarta Islamic Index (XIJI) which tracks the movement of the Indonesian stock exchange (IDX). The Index, which was launched alongside the Premier ETF Indonesia Consumer Index, had received its Shariah stamp of approval from the Indonesian Council of Ulama’s National Shariah Board at the start of this year and comprises of 30 stocks which fulfill the criterion of the country’s Financial Services Authority — or Otoritas Jasa Keuangan (OJK). Deutsche Bank Indonesia and Indo Premier Securities have been mandated as the ETF’s custodian bank and authorized participant respectively. This marks the launch of Indonesia’s first Shariah compliant ETF, a product which Indonesia-based fund managers have claimed to have previously lacked regulatory support and investor awareness. During his presentation at the IFN Indonesia 2013 forum held on the 16th April, Ernawan Salimsyah, director and chief investment officer at IPIM, stressed on the need for Shariah compliant ETFs in a market which has IDR193 trillion (US$19.86 billion) in Islamic banking assets and a Shariah compliant mutual fund industry with IDR8 trillion (US$823.21 million)-worth in assets under management. According to data from Bank Indonesia; the republic’s total banking assets, including Islamic banks, currently stands at IDR4,211 trillion (US$433.31 billion), while the market capitalization of the Indonesian Shariah stock index stands at IDR2,824 trillion (US$290.59 billion). Islamic ETFs are said to be well-suited to the Indonesian investment environment as it protects customers against market volatility by allowing them to liquidate their position at any given time and is supervised by multiple agencies; including the custodian bank, stock exchange authorities and the OJK. The republic, which has an 88% Muslim majority, or 205 million Muslims, currently faces a dearth in Shariah compliant investment products which provide fair and efficient pricing, instant diversification, public access and ownership, as well as wide coverage of the Indonesian market and instant and immediate access for investors.