*Article is updated as of 7 May 2020
FTSE ST Singapore Shariah Index, a new Shariah-Compliant index, has recently being launched in October 2018.
Why should we be excited?
Because for the first time, Singaporean Muslims investors now have a benchmark for Shariah-compliant companies listed on Singapore Exchange (SGX).
Think about this as the Halal version of the Straits Time Index (STI).
This wasn’t the the first time FTSE Russell, SGX and Yasaar partnered together to launch a Shariah-compliant index.
Back in 2006, they came together to launch the FTSE-SGX Asia Shariah 100 index, which includes listed companies from other Asian countries.
This FTSE ST Singapore Shariah Index will focus on SGX-listed companies only.
What does this means to Singaporean Muslim investors?
There’s 2 good reasons that will benefit the everyday Singaporean Muslim retail investors:
- They can now handpick individual companies or financial products from the list to invest in, without second-guessing whether they are Shariah-compliant or not.
- They can expect more Shariah-compliant products to be created in the near future, such as the popular Exchange Traded Funds (ETFs).
Previously, Singaporean Muslim investors do not have a halal alternative to the Straits Times Index (STI) ETF.
STI ETF is popular and attractive among the general local investors because they get to diversify their investments across Singapore’s top companies without committing too much capital into any individual companies, while keeping the research legwork to the minimal.
However, as the STI ETF comes as a ‘bundle’ in a form of the top 30 companies listed on Singapore Exchange (SGX), these companies are essentially a mixed of Shariah-compliant and non-compliant ones.
Hence, it is not ideal for the Muslim investors.
Now with the launch of this index, it helps even the savvy ones to sift out non-Shariah compliant companies quickly before diving further into the financial details of the remaining identified Shariah compliant firms.
Wait a minute – how do they go about creating this Index in the first place?
Shariah screening is done by a panel of Shariah scholars from Yasaar, a global independent Shariah consultancy firm.
Firstly, companies which are involved in non-Shariah compliant activities such as non-Islamic banking, alcohol, pork-related products, entertainment, tobacco and weapons are sift out.
So you can imagine companies listed in SGX such as Genting Singapore, which involves in entertainment, and Thai Beverage, which deals with alcohol, will be excluded from this first round of filtering.
Next – the remaining companies are screened out if they fall outside the acceptable financial ratios under the Shariah.
For example, the company must have debt which is less than 1/3 (or 33.333%) of its total assets.
If we looked at DBS most recent 2nd Quarter of 2019, we can see that their debt is more than 33.333% (91% in fact) to its total assets.
In this instance, DBS will be excluded from this index for this quarter (unless they chose to greatly reduce to that acceptable ratio in the next quarter).
Do note that the list of companies which are identified as Shariah-compliant in the index may change from time to time if they fail in any of the stages of the screening process.
Shariah screening is reviewed on a quarterly basis in March, June, September and December.
As of the latest update on its factsheet (30 Sep 2019), there are currently 38 companies on SGX which are Shariah-compliant.
What are the current top 10 companies identified as Shariah-compliant?
If you have been wondering from the start which companies exactly that have been identified as Shariah compliant in the Singapore Exchange, here it is (based on market capitalisation weightage) as of 30 Sep 2019:
- Singapore Telecommunications (Singtel)
- Hongkong Land Holdings
- Keppel Corporation
- Singapore Airlines
- Venture Corp
- Mapletree Industrial Trust
- Singapore Press Holdings
- NetLink NBN Trust
How to check the latest factsheet?
Go to FTSE Russell Factsheet search page here.
Type in the search bar with “FTSE ST Singapore Shariah Index” and enter.
Results will appear under Market-Cap Weighted -> Asia Pacific. Click on “FTSE ST Singapore Shariah Index” and the PDF download will begin.
We’re seeing good initiatives being implemented from the respective financial bodies and organisations in the recent times.
With the swelling Islamic Banking & Finance industry, it’s about time we see such asset management tools such as this benchmark equity index.
It’s only getting started.
Importantly, it just made our jobs much easier today.
Thank you on the write up above.
Was wondering if the debt ratio for conventional banks such as DBS/ UOB are 1/3 of the Total Assets for the recent quarter, does it mean its allowed for me to invest in? Considering in your first point that one should avoid stocks that are non-Shariah compliant.
Thanks for the question Hada.
If the debt ratio is within 1/3 of the total assets, that ticked off one box of it being Shariah-compliant. However, there are also other boxes that need to be ticked off as well, such as:
– Cash and interest-bearing items are less than 1/3 of total assets
– Accounts receivable and cash are less than 50% of total assets
– Total interest and non compliant activities income should not exceed 5% of total revenue
Have a read on the other article I’ve written here (see Chapter 4.4.1.). Hope that helps 🙂
Thank you for the well written article.
Is there a regular savings plan that focus on this Shariah compliant index?
Any news of ETF that focus solely on this index in S’pore?
Also, how often does this Shariah committee review the index? I’m sure there will be changes in the constituents.
Hi Muhammad, thanks for the questions.
As of now, I have yet to hear any updates on new Regular Savings Plan (RSP) or ETFs that is focusing on this Shariah-compliant index. However, you can check out this article on other Shariah-compliant RSP and Savings Account available in Singapore.
There will be changes in the constituents definitely – and the committee review the index on a quarterly basis (March, June, September, December). You may read more here.
Hope that helps!
Salam, great article but How do we view what are the stocks in this FTSE ST Singapore Shariah Index?
I have the same question myself. Trying to find the other constituents instead of just the top 10.
To Dahna and Dzul, I’ve dig deeper and checked with the FTSE team with regards to the list of Shariah-compliant constituents. Unfortunately, besides the top 10, they do not disclose the full list to retail investors like us as their clientele are mainly towards financial businesses (VCs, private investment firms, hedge funds and alike). I’ve followed up on how much it would cost but there are no news yet. Will update here if any. Thanks.
salam, how could i get the list of shariah compliant sgx stocks?
Wsalam Syahmi, you may refer to the latest factsheet as of 28 Feb 2020 here.
Subscribe to Islamicly. Download their app and watch their webinar. 72 syariah compliant stocks in Singapore. The good ones with high dividends are Singtel…Vicom…Apac Realty….HC Surgical.
All banks and insurance companies are forbidden.
Forex can fall into haram practices unless you are a professional.
Options involves ambiguity so it is forbidden.
ETF are a basket of maybe compliant and non compliant stocks.
The rest of the shariah compliant stocks are mid range paying dividends between 2 to 6 %.
Majority of the Shariah compliant stock does not pay dividends.
There you go on your way to become a millionaire.
Salam, great post! Would you be able to advice how I’m able to invest in this Index? Which broker has this counter?
Salam Razif, unfortunately there isn’t any ETF that is tracking this index today, at least to my knowledge. However, you can check out other global Shariah-compliant ETFs in my article here. Most brokers can provide you access to global stock exchanges, so long you request for it upon opening an account.
Singapore Airlines Debt to Equity ratio is too high to be Halal.
I am not sure investing in SIA stock is Halal?
Yes that’s what I thought too! But since the shariah scholars has tagged it as shariah compliant…it should be alright. Then again, it’s based on how comfortable you are to follow their decisions
Hi Huzaif, Dahna, I’ve not personally delve deeper into SIA financial report yet. So long you’ve did your due diligence and it is something you’re not comfortable with, it is better to stay in the sideline 🙂
SIA…..DBS…UOB….OCBC….SPH….are under Non Compliant…..10/09/2020.
So how do you go about buying this ETF? Is it available on trying platforms like CIMB Itrade?
Hi Farhan, unfortunately this isn’t any Shariah-compliant ETF(s) today that is focusing on SG market. However, you can check out Shariah-compliant ETFs in US, Europe and other emerging markets here. As long as your CIMB Itrade has access to NASDAQ, London Stock Market, Swiss Exchange – you will be able to purchase it.
Salam, may I know where I can get the copy of the factsheet as I’d like to make sure I’m updated with the latest factsheet.
Salam Eman, have a look at my updated post above. I’ve included the step-by-step for easy reference.
Salam, May i know if day trading is allowed in Islam. Are short-term investments allowed? If it is what is the time difference between short term and long term, are there any guidelines?
Wsalam Zakirah, personally I think it is fine to do trading or short-term investments so long it is deemed to be free from the non-halal elements (interest, excessive uncertainty, speculations to name a few).
Short-term investments normally are expected to be sold or cash out within the next 12 months, whereas long-term investments are the ones that you intend to hold beyond a year. Hope that helps.
Would like to seek clarification on, apart from the top 10 Shariah compliant stocks, where could we see the full list of Shariah compliant stocks?
Is it being updated each month based ?
Hi Brother Khairul Ruzaini,
Do you have an easier access to touch base with regards to this type of investments. I am personally investing in Bursa Malaysia with a proxy overseas and find that SG is lacking in this type platforms which serve greater opportunity for the new edge investors who are interested in trading SC stocks and shares. Would like to touch base with you if possible
Hi Syarif, sure – feel free to drop me an email at [email protected].
Good to see Singapore moving towards Shariah-compliant products.
Is there an ETF for this FTSE-SGX shariah index? If not then how can one make use of this index to invest?
On another note what is the Shariah-compliant ETFs to invest our CPF SRS monies into?
Wsalam, unfortunately there isn’t any ETF that tracks this index at the moment. I would personally refer to it on a quarterly basis just to understand which stocks have been consistently on the list, and own one if there’s good opportunities.
On the last question, I’ve not personally invested my SRS monies, but perhaps our community here can chime in 🙂
First of all, kudos to SmartMamat for your website and the valuable information that you are sharing! Great job and please keep it up!
I am at the age where creating and contributing to the SRS account is an important aspect for my retirement needs as well as personal income tax saving benefits. However, after hunting high and low, I have only managed to find 2 SRS-investable funds that are shariah-compliant: NTUC Takaful Fund and Templeton Shariah Global Equity Fund.
It would be really helpful if you can review these 2 funds, share an article about SRS, and perhaps find out if there are any other funds that we can consider.