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Sharia shares ‘will be hit by slowdown’ – S&P

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Points of Essence:

  • S&P opined that Shariah stocks will not be spared from the economic crisis due to larger exposures to  the material and energy companies especially in the 3rd quarter of the year. They were saved in the first half of the year by a minimal exposure to the financial sector.
Shariah-compliant shares are just as likely to be hit by the global downturn as other types of shares. (Getty Images)

Shariah-compliant shares are just as likely to be hit by the global downturn as other types of shares

By Soren Billing

Sharia-compliant stocks are just as likely to be hit by a global economic slowdown as other shares are, the vice president of Global Equities at Standard & Poor’s Index Services has said.

“Sharia is not intended to be an outperformance strategy, it’s supposed to be a strategy as per religious beliefs and also as per good corporate governance,” Alka Banerjee said. “But that doesn’t necessarily translate into outperformance.”

Sharia compliant stocks were largely spared from the financial turmoil in the first half of the year due to their low exposure to the financial sector, but have been harder hit in the third quarter as a result of larger exposure to material and energy companys.

In the last quarter, the S&P Global index fell 16.6 percent, while the S&P Global Shariah benchmark was down 19.1 percent.

In the year to date, S&P Global shares are down 25.3 percent while the sharia compliant index is down 23.4 percent.

“There will be periods when it does better and there will be periods when it does not,” Banerjee said. “But over time it will be very, very close.”

Source: http://www.arabianbusiness.com

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Written by Suapi Shaffaii

November 5, 2008 at 11:11 pm

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