Shariah Investors Lose US$5.65 Trillion in Third Quarter

Shariah investors have not been immune from the global equity market sell-off, according to Standard & Poor’s, with more than US$5.6 trillion wiped off the value of Shariah-compliant equities worldwide during the third quarter of 2008. However, the latest review of the S&P Global Shariah Index Series confirms that in most cases, Shariah investors have benefited from their lack of exposure to financials, which have been the focus of the market sell-off. Stocks deemed to comply with Islamic law lost 23.4% of their value on a total return basis over the year to 30 September 2008, as measured by the S&P Global BMI Shariah index. The non-Shariah conventional index, S&P Global BMI, fell 25.3% over the same period. Shariah-compliant stocks in emerging markets bore the brunt of the selling, with the S&P Emerging Markets BMI Shariah plunging 37%, compared to a 35.4% loss for its non-Shariah counterpart. “While equity markets around the world have experienced a tumultuous quarter, Shariah investors continue to be shielded to some extent by the exclusion from their portfolios of financial stocks and other highly leveraged companies, which do not satisfy the strict compliance criteria associated with Islamic law,” said Alka Banerjee, vice president, Standard & Poor’s Index Services.

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