SHARI’AH-COMPLIANT companies listed on the Philippine Stock Exchange, Inc. (PSE) have decreased to 55 from 60 after the market operator’s quarterly screening for the period ending Dec. 25.
Eight securities were removed, and three were added based on the PSE’s latest Shari’ah-compliant list, released in a memorandum dated Jan. 8.
The omitted securities comprise those of property developer Araneta Properties, Inc., construction aggregates supplier Concrete Aggregates Corp. “A” and Concrete Aggregates Corp. “B,” air conditioning and refrigeration solutions provider Concepcion Industrial Corp., cement manufacturer Holcim Philippines, Inc., flour producer Liberty Flours Mills, Inc., mining company United Paragon Mining Corp., and technology retailer Upson International Corp.
The newly added securities belong to food cart company Fruitas Holdings, Inc., oil giant Petron Corp., and holding firm Prime Media Holdings, Inc.
Shari’ah is the moral and religious code of Islam that encompasses rules, regulations, teachings, and values governing the lives of Muslims, the market operator noted.
“Shari’ah-compliant investment instruments create a mechanism for listed companies to gain access to potential funding from Islamic investors including those in countries in the Middle East and other countries with high Islam population such as Malaysia and Indonesia,” the PSE said.
The PSE issues a list of Shari’ah-compliant securities on a quarterly basis. It released the previous list on Oct. 4, covering the period ending Sept. 25.
“The adoption of Shariah in the capital market will help foster an ethical investment climate that provides opportunities for local Islamic investors to comfortably participate in the Philippine business community. Due to the ethical stance of putting premium on compliance to Islamic laws over profitability, Islamic investors can better gauge the risks involved in their investments,” the PSE said.
The market operator said it had engaged the services of IdealRatings, Inc. to screen listed companies in accordance with Shari’ah standards as specified by the Accounting and Auditing Organization for Islamic Financial Institutions.
The PSE also said that IdealRatings checks companies’ adherence to Shari’ah standards in terms of their business activities and financial ratios.
Under the business screening, the income of companies derived from activities such as adult entertainment, alcohol, cinema, defense & weapons, financial services, gambling, gold and silver hedging, interest-bearing investments, music, pork, and tobacco must be less than 5%.
In terms of financial ratio screening, a company’s cash or interest-bearing deposits or investments should not exceed 30% of its market capitalization, while its interest-bearing debt should not go beyond 30% of its market capitalization.
“Through the screening process, securities that are engaged in activities involved in Haraam (impermissible or unlawful) will be taken out from the list of Shari’ah compliant stocks,” the PSE said.
IdealRatings, a provider of Islamic finance data, is a United States-based company that specializes in screening securities for Shari’ah compliance. — Revin Mikhael D. Ochave