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BANGLADESH: Bangladeshi
port city bourse, the Chittagong Stock Exchange (CSE), is due to launch
two new indexes including an Islamic index on Sunday, the 12th
October. To be known as CSE All Shariah Index, the indicator, to be
introduced alongside the CSE-50, is designed in response to the growing
interest in Islamic investment by Shariah-conscious investors.
Developed by India Index Services and Products (IISL), a group company of
the National Stock Exchange of India and a subsidiary of NSE Strategic
Investment Corporation, the CSE All Shariah Index can be utilized by
investors to track the performance of Shariah compliant securities that
form part of all listed companies on the CSE other than mutual funds and
corporate bonds.
Taking advantage of the expertise of neighboring country India, CSE also
engaged the services of India-based Taqwaa Advisory and Shariah
Investment Solution (TASIS) to design the underlying Shariah framework of
the index, a process which took six months to complete. Employing a
two-step screening approach (business screening and financial screening),
TASIS formulated the Shariah framework using five years’ worth of data of
the Bangladeshi market.
Speaking exclusively to IFN, Dr Shariq Nisar, the director of TASIS,
expressed his optimism on the reception of the index. “After a meeting
with the Bangladesh Securities and Exchange Commission, we met with a
number of brokers and I am very confident, having seen their excitement
for the Shariah index, that it will be taken very well. But of course we
will need to see how it performs.”
Dr Shariq shared that some challenges are to be anticipated especially in
terms of having a large enough pool of Shariah compliant stocks. “The
number of companies listed on the CSE is modest in comparison to India so
obviously there will be challenges. We will see how it will be dealt out
in the future depending on the economic situation of Bangladesh.”
Reassuring that there are a sufficient number of Shariah stocks at the
moment, Dr Shariq is confident that as awareness on the advantages Shariah
compliance increases, more companies in Bangladesh would want to remain
within the boundaries of Shariah compliance.
Covering 17 sectors of the economy, CSE All Shariah stocks represent
almost half of the total market capitalization at about 48.6% and approximately
41.35% of float-adjusted market capitalization of CSE-listed companies;
constituents of the index will be reviewed by IISL on an annual basis
using data ending June each year. According to the CSE, its Shariah index
is constructed using a free float market capitalization methodology and
has a base date of the 4th July 2010 indexed to a base value
of 1,000. The index would be Bangladesh’s second Islamic index, following
in the footsteps of the Dhaka Stock Exchange which launched its Shariah
index in January this year.
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