Investing this Aidilfitri: How the FTSE ST Singapore Shariah Index Selects its Stocks

Core Insights - The FTSE ST Singapore Shariah Index is designed to track companies on the Singapore Stock Exchange that comply with Islamic investment standards, appealing to both Muslim and broader investors seeking ethical investment options [2][19]. Group 1: Shariah Compliance Criteria - The index uses a two-step screening process: business activity screening and financial ratio screening [7][19]. - Business activity screening excludes companies involved in industries that do not meet Islamic ethical guidelines, such as banking, gambling, and alcohol [4][8]. - Financial ratio screening ensures that companies maintain specific thresholds for leverage and interest-bearing assets, with a gearing ratio limit of 33.33% and cash and interest-bearing securities not exceeding 33.33% of total assets [16][10]. Group 2: Examples of Compliance - Singapore Telecommunications Limited passes the business activity screening due to its focus on digital services and telecommunications [6][5]. - Hongkong Land Holdings Limited meets the financial ratio criteria with a gearing ratio of 12% and cash ratios below Shariah limits, allowing it to be included in the index [11][12]. Group 3: Review Process - The FTSE ST Singapore Shariah Index is reviewed bi-annually, ensuring that companies that no longer meet Shariah criteria are removed and replaced [13]. Group 4: Broader Appeal - The index's criteria may attract a wider audience due to its emphasis on lower leverage and sustainable business models, appealing to investors focused on financial discipline [14][15].