By Daniel Stanton
New Dow Jones index will track 30 largest Shariah compliant companies in China and Hong Kong.
Dow Jones Indexes has today announced the launch of a new Islamic index that will track Shariah compliant companies in mainland China and Hong Kong.
The Dow Jones Islamic Market China/Hong Kong Titans Index will track 30 of the largest Shariah compliant companies whose primary operations are based in mainland China and Hong Kong but are listed on the Stock Exchange of Hong Kong.
Hang Seng Bank in Hong Kong has licensed the index, which will be used to underlie an index fund.
Michael A. Petronella, president of Dow Jones Indexes, said: "The Dow Jones Islamic Market China/Hong Kong Titans Index offers the best of both worlds - the performance of Shariah compliant stocks and Chinese companies."
To be included in the index, stocks must pass industry and financial ratio screens for Shariah compliance. Companies that are involved in alcohol, weapons, entertainment, financial services, pork-related products and tobacco are excluded.
Companies are also excluded if the following financial ratios are 33% or more: debt divided by trailing 12-month average market capitalisation; cash plus interest-bearing securities divided by trailing 12-month average market capitalisation; and accounts receivables divided by trailing 12-month average market capitalisation.
Stocks must have an average float-adjusted market capitalization of HKD 5 million in 12-month daily trading volume to be eligible for inclusion.
As of October 9, 2007, the top five components by float-adjusted market capitalisation are China Mobile Ltd., CNOOC Ltd., Esprit Holdings Ltd., China Unicom Ltd., Li & Fung Ltd. The Dow Jones Islamic Market China/Hong Kong Titans Index is up 50.39% this year to date.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.