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www.islamicnancenews.com MARKET REPORT Dow Jones Islamic Market Indexes in July: How Stable is the Global Recovery? By Gérard Al-Fil This years summer rally was like the sun coming out after a thunderstorm: sudden and unexpected. It caught many private investors by surprise, especially those who were on vacation. All Dow Jones Islamic Market (DJIM) Indexes added value, with the exception of the DJIM Kuwait Index. To coin a phrase, the worlds stock markets became a sort of bullish state within a broken global state. East Asia emerged as the clear winner. The DJIM Indonesia Index posted the largest prot in July (as of the close of trading on the July 27th), closing 14.71% higher at 1009.71 points. The biggest Muslim country in the world with a total population of 237 million people also topped all other Dow Jones Islamic Market indexes in its year-to-date performance with a very impressive 96.57% increase. Indonesia was followed by the DJIM South Korea Index, which added 14.02%, closing at 631.57 points. The DJIM Hong Kong Index posted the third largest advance and nished at 1,229.24 (up 13.85%), beneting from positive data provided by China, which reported a 1.2% higher liquid steel production for the rst half of 2009. engines now: the US, Europe, Japan and the Emerging Markets, where 40% of the worlds production is being generated. Islamic nance is not only concentrated in the Muslim world. It is an international phenomenon. On the 27th July, Dow Jones Indexes announced it had extended its Shariah stock market universe by 11 countries, among them, the very important Saudi Arabia. Riyadhs Tadawul market accounts for nearly half of the entire market capitalization of all GCC stock exchanges (Saudi Arabia, Kuwait, Qatar, Bahrain, United Arab Emirates and Oman). It also equals nearly 75% of the entire value traded on these exchanges. The other 10 markets that were added comprise Islamic as well as non-Islamic states: Argentina, Colombia, Croatia, Lebanon, Mauritius, Nigeria, Peru, Serbia, Tunisia and Ukraine. This move increases the total number of countries in the DJIM Index universe to 68 from 57. Although oil prices picked up in July by 13% to US$68 per barrel, the Shariah compliant stocks of the Arabian exchanges could not join the bullish bandwagon. The DJIM Kuwait Index hit the bottom of the charts, dropping by 4% down to 979.77 points. It underperformed even the DJIM GCC Index, which climbed less than 1% (0.95% to be exact) to 1,359 points. The worlds stock markets became a sort of bullish state within a broken global state All Arab oil states were hit badly by the default of two Bahraini bank subsidiaries in May and June, owned by Saudi families Saad and Algosaibi. According to the Riyadh daily newspaper, some 100 banks worldwide lent money to the two institutions. The growing global demand for basic materials is also reected in the sector indexes composed of entities which operate within Shariah. The DJIM Basic Materials Index surged 9.99%, followed by the DJIM Industrials Index (gaining 8.45%) and the DJIM Consumer Goods Index (8.21% higher). All sector indexes gained value, with the DJIM Utilities Index posting the smallest prot (up 2.65%). According to Credit Suisse Research, not only Chinese, but global economic indicators continue to improve. However, the US consumer is not the leading force behind this recovery. Rather, the Swiss bank states, it is the increasing production in the emerging markets that is driving this modest recovery forward. Dr Nasser Saidi, chief economist of the Dubai International Financial Centre (DIFC) Authority, agrees. The global economic plane has four Sources claim that these loans may total some US$13 billion, with the daily even mentioning an astounding sum of US$40 billion. Investors must, therefore, be prepared for more surprises such as defaults linked to the Saad and Algosaibi groups. Consolidation in the world economy is gaining pace and it will be painful. Other risks remain and could threaten the tiny ower called recovery. These range from a continuing global spread of the swine u to a possible Israeli aerial attack on Iran, which the Israeli government says is still an option, despite increasing opposition from the Obama administration. Gérard Al-Fil reports extensively from the UAE, Kuwait, Bahrain, Qatar, Oman, Turkey and Iran. He can be contacted at al[email protected]. Next Forum Question The UAE central bank has directed banks, including Islamic nancial institutions, to take provisions of up to 75% against their exposure to the troubled Saad and Algosaibi groups over two years. Is the central bank being overcautious? Or is this an indication that the nancial environment in the Gulf could deteriorate even further? If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300 words to Christina Morgan, Forum Editor, at: [email protected] before Wednesday, 5th August 2009. © Page 18 31st July 2009 www.islamicnancenews.com MARKET REPORT July 2009 Islamic Markets Measure Monthly report on the performance of the DJIM Indexes Based on the close of trading on the 27th July, the global Dow Jones Islamic Market Titans 100 Index, which measures the performance of 100 of the leading Shariah compliant stocks globally, gained 7.24% month-to-date, closing at 1895.21. In comparison, the Dow Jones Global Titans 50 Index, which measures the 50 biggest companies worldwide, posted a gain of 6.86%, closing at 153.32. The Dow Jones Islamic Market Asia/Pacic Titans 25 Index, which measures the performance of 25 of the leading Shariah compliant stocks in the Asia/Pacic region, increased 7.28%, closing at 1631.58. The Dow Jones Asian Titans 50 Index, in comparison, posted a gain of 4.69%, closing at 119.55. Measuring Europe, the Dow Jones Islamic Market Europe Titans 25 Index, which measures the performance of the 25 of the leading Shariah compliant stocks in Europe, closed at 1883.25, a gain of 8.74%, while the pan-European blue chip Dow Jones STOXX 50 Index gained 9.32%, closing at 2402.88. The Dow Jones Islamic Market Turkey Index closed at 2567.14, a performance of 4.56% month-to-date, while the Dow Jones Turkey Total Stock Market Index closed at 898.65, a gain of 11.54%. Measuring the performance of Shariah compliant stocks of ve of the Gulf Cooperation Council (GCC) member states, the Dow Jones Islamic Market GCC Index closed at 1359.32, a gain of 0.95%. The conventional Dow Jones GCC Index was up 1.45%, closing at 1394.92. Other Markets and Asset Classes The Dow Jones Islamic Market BRIC Equal Weighted Index increased 8.08%. It had a closing value of 1628.23. By comparison, the Dow Jones BRIC 50 Index closed at 500.42, a gain of 7.70%. The Dow Jones Citigroup Sukuk Index, which measures the performance of global bonds complying with Islamic investment guidelines, increased 2.90%, closing at 112.58. Measuring the performance of 50 of the largest Shariah compliant US stocks, the Dow Jones Islamic Market US Titans 50 Index increased, closing at 1939.02. It represents a gain of 6.65%. The US blue-chip Dow Jones Industrial Average increased 7.83%, closing at 9108.51. The Dow Jones Islamic Market Sustainability Index, which measures sustainable practice business of companies respecting the Shariah laws, increased 8.95%, closing at 2101.08. The conventional Dow Jones Sustainability Index gained 8.31% with a closing value of 877.94. Middle East and GCC Regions Global July 2009 Industries Winners and Losers In July, the Dow Jones DFM Titans 10 Index, measuring the 10 largest and most liquid stocks listed on the Dubai Financial Market, closed at 2361.32. It is a gain of 3.08% month-to-date. The Dow Jones Islamic Market Kuwait Index posted a loss of 4.00%, closing at 979.77. Its conventional counterpart index, the Dow Jones Kuwait Composite Index, was down, closing at 236.13. It represents a loss of -0.91%. The three best performing Dow Jones Islamic Market Industry Indexes were Basic Materials, Industrials and Consumer Goods with performances of 9.99%, 8.45% and 8.21%, respectively. The Dow Jones Islamic Market Utilities, Dow Jones Islamic Market Telecommunications and Dow Jones Islamic Market Health Care indexes were the three worst performing industry indexes with performances of 2.65%, 5.25% and 6.30%, respectively. Asia: Performance of Dow Jones Islamic Market versus Conventional Dow Jones Indexes Dow Jones Islamic Market Indexes Index Names DJIM Asia/Pacic Index Index Close July 2009 Conventional Dow Jones Indexes MTD 2009 1141.38 7.12% DJIM China Offshore Index 2424.69 DJIM Hong Kong Index 1229.24 DJIM India Index DJIM Indonesia Index DJIM Japan Index DJIM Malaysia Index MTD 2009 Index Close July 2009 5.04% 111.33 12.01% 10.26% 3936.35 13.85% 11.31% 384.05 1388.79 7.12% 5.74% 1475.87 1009.71 14.71% 12.52% 123.98 938.77 4.19% 1.27% 80.14 1210.25 5.9% 7.54% 166.91 Index Names DJ Asia/Pacic Index DJ China Offshore 50 Index DJ Hong Kong Index DJ India Total Stock Market Index DJ Indonesia Index DJ Japan Index DJ Malaysia Index Dow Jones-JS Pakistan Islamic Index 8847.27 6.62% 5.94% 513.14 DJ Pakistan Total Stock Market Index DJIM Philippines Index 1340.32 1.49% 13.01% 145.15 DJ Philippines Index DJIM Singapore Index 958.68 11.42% 11.25% 228.84 DJ Singapore Index DJIM South Korea Index 631.57 14.02% 13.28% 197.94 DJ South Korea Index DJIM Amana Sri Lanka Index 1112.84 2.96% 3.54% 159.94 DJ Sri Lanka Index DJIM Taiwan Index 3704.66 8.41% 9.51% 133.17 DJ Taiwan Index DJIM Thailand Index 1252.94 2.6% 3.70% 79.90 © Page 19 DJ Thailand Index 31st July 2009