Amanie launches Shariah stock screening

By Habhajan Singh
Investment managers who need to select and monitor Shariah compliant stocks now have a new tool at their disposal.
Amanie Business Solution Sdn Bhd, a Malaysian-based Shariah advisory company, has launched a Shariah stock screening service that can be employed to screen stocks according to multiple methodologies and is not restricted to any one proprietary method of screening.
The service will target new entrants into the Islamic fund management industry. There is currently an influx of conventional fund managers managing Shariah funds as investors have shied away from investing in conventional funds in the wake of the global financial crisis, the company said in a statement.
The launch of the Amanie Screening was held at the end of the half-day seminar entitled "Potentials and Opportunties in Islamic Asset Management post-2008 Global Financial Crisis" organised by the company in Kuala Lumpur last Wednesday.
Amanie Screening aims to provide "the never before available element of flexibility" in terms of screening methodology used to allow clients to choose from a number of Shariah-complaint screening methodologies available in the market, the company said. It also caters for portfolio screening based on the specific needs of the client.
"We aim to provide the market with comprehensive and affordable information that will not be constrained by the adoption of any specific methodology as the core methodology for the screening of stocks," Amanie chief executive officer Dr Mohd Daud Bakar said.
At the moment, stock screening solutions are available from providers of stock indices that include the Dow Jones Islamic Market Indexes and the FTSE Global Islamic Index Series (GIIS). The GIIS, for example is presented as an equity benchmark index designed to track the performance of leading publicly traded companies whose activities are consistent with Shariah law. The Dow Jones, which first introduced an Islamic index in 1999, today has more than 70 indices that are "maintained based on a stringent and published methodology".
Islamic capital market consultant at Amanie Baiza Bain said, Amanie's stock screening service allows clients to go beyond indices provided by any one such provider. This screening is part and parcel of ensuring the transaction is in line with the requirements of Islamic finance.
When carrying out transactions, Islamic financial and capital market players need to ensure that they do not conflict with the conscience of Muslims and religion of Islam, including conducting activities that are free from usury (riba), gambling (maisir) and ambiguity (gharar), which are prohibited by Islam.
In Malaysia, the Securities Commission (SC) maintains a list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC). Updated twice a year, the latest listing on Nov 28, 2008, includes 855 securities listed on Bursa Malaysia, including new entrants Equine Capital Bhd, Hap Seng Consolidated Bhd, Ho Wah Genting Bhd, IJM Land Bhd and Kian Joo Can Factory Bhd.
In classifying these securities, the SC gatheres information on the companies from various sources, such as the company's annual financial reports, responses to survey forms and through inquiries made to the company's management. The SC, through the SAC, continues to monitor the activities of all companies listed on Bursa Malaysia to determine their status from the Shariah perspective.
The SC guidelines state that companies will be classified as Shariah non-compliant securities if they are involved in activities like financial services based on riba (interest), gambling and gaming, manufacture or sale of non-halal products or related products and conventional insurance.
"We can also accommodate those who have a zero-tolerance for interest," said Bazia, referring to the interest tolerance of Kuwait Finance House (KFH). For securities under the SAC's radar, a 5% benchmark has been set when assessing the level of mixed contributions from activities that are clearly prohibited such as riba (interest-based companies like conventional banks), gambling, liquor and pork.
The SAC has set the benchmarks, based on ijtihad (reasoning from the source of Shariah by qualified Shariah scholars), to determine the tolerable level of mixed contributions from permissible and non-permissible activities towards the turnover and profit before tax of a company.

PHIOTOGRAPH: Mohd Daud (right) with participants at the Amanie Islamic asset management seminar (from left) Fajr Capital plc MD Mohamed Rafe Hanneef, Financial Technologies Group Middle East consultant Dr Zaha Rina Zahari and Failaka Advisor MD Mark Smyth

(This story appeared in The Malaysian Reserve on Feb 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)