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Thailand lures Middle East investment with companies free of pork, booze and usury
“You have to go back and see how the asset is constructed,” Singh said. “If it’s all backed by paper, like in most of the sub-prime cases, then it’s not acceptable by Sharia law.”
Throughout the past four decades, as the Middle East has developed powerful financial hubs, scholars have worked to interpret Islamic financial teachings in a modern context, he said.
Muslim-friendly stocks have shown they can at least compete. A global index of FTSE-picked “emerging” stocks has been slightly outperformed by its Sharia-compliant counterpart, which has brought in a lifetime return of 4.6 percent.
And in the last six months, as most indices have tumbled, many Sharia-friendly stocks appear more resilient — if only by a few percentage points. The FTSE’s “All-World” index made up of more than 2,800 companies has dropped by 44 percent in the last six months. But the Sharia-vetted slice of that grouping dropped by only 40.2 percent.
Other FTSE indices in the past six months have fared more than 5 percent worse than their Sharia-vetted counterparts. “Sometimes they perform way out of line with (non-Sharia-friendly) indices and sometimes they perform very closely,” Hoff said. “But that one percentage point can add up to a lot of money.”
Many companies operate in compliance with the Qur’an without even trying. When the FTSE Group vetted Thailand’s stock exchange through Dubai-based Sharia consultants, it found that nearly half of the 132 listings were already in line with Islamic codes.
The exchange only needed to ward those 50-odd companies into a special index and start pitching to the oil-rich Middle East. Major Thai stocks cleared for the index include Banpu, a power company, and the wealthy Siam Cement Group.
Though the index will mostly target Arab Muslims, Hoff said it could possibly lure investors of all faiths if the profits are right.
“If they see the performance is better,” he said, “it’ll be attractive to everybody.”
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