Islamic Fund Management
149
Table 4.24: FTSE/JSE Shariah Screening Methodology
Business Activity Screening Financial Ratio Screening
 Conventional finance (e.g. non-Islamic
banking, finance and insurance)
 Alcohol
 Pork-related products and non-halal food
production, packaging and processing or any
other activity related to pork and non-halal
food
 Entertainment (casinos, gambling and
pornography)
 Tobacco
 Weapons, arms and defence manufacturing
 Debt is less than 33% of total assets
 Cash and interest-bearing items are less than
33% of total assets
 Accounts receivable and cash are less than
50% of total assets
 Total interest and non-compliant income
should not exceed 5% of total revenue
Source: Market Data FTSE/JSE Shariah Indices
2. Islamic ETF
Absa Capital launched South Africa’s first Shariah-compliant, equity-linked ETF, i.e. New Funds
Shariah Top 40 Index ETF, on 11 March 2009. The IPO for this new ETF opened on 23
February and it was listed on the JSE on 6 April 2009. The Shariah Top 40 Index ETF provides
investors with a diversified exposure to the broad market by investing in one Shariah-
compliant ETF and earning a market-related performance. The New Funds Shari’ah Top 40
Index ETF tracks the price performance of the FTSE/JSE Shari’ah Top 40 Index, which is jointly
established by FTSE and the JSE.
The FTSE/JSE Shariah Top 40 Index comprises securities that represent the performance of
the 40 largest and most liquid JSE-listed companies, the activities and financial ratios of which
are Shariah-compliant. The index is rebalanced quarterly and all dividends will be paid out to
the investors on a quarterly basis whenever declared. As shown i the sector that
dominates the asset mix of the New Funds Shariah Top 40 Index ETF is basic materials
(55.86%).
Chart 4.26: Sector Allocation of New Funds Shariah Top 40 Index ETF
Source: ABSA CIB