Revised Shariah Screening Methodology to Spur Greater Foreign Islamic Funds Inflow
28 November 2013   |   Kuala Lumpur

Securities Commission Malaysia (SC) will release the updated list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC) on 29 November 2013, based on the revised screening methodology as announced on 18 June 2012.

Under the revised screening methodology, SAC adopts a two-tier quantitative approach which applies the business activity benchmarks and the financial ratio benchmarks. The revision has taken into consideration of the rapid development of the Islamic finance industry in Malaysia, since the Shariah screening methodology was first introduced in 1995.
The revision will potentially spur greater inflow of foreign Islamic funds into Malaysian Shariah-compliant equities, thus expanding the Islamic capital market’s global reach, as outlined in the Capital Market Masterplan 2.

The updated list, which takes effect on 29 November 2013, features a total of 653 Shariah-compliant securities. These counters constitute 71 per cent of the 914 listed securities on Bursa Malaysia.

The list includes 16 newly classified Shariah-compliant securities and excludes 158 from the previous list issued in May 2013. It also indicates that the Shariah-compliant securities are well represented across the business sectors (Appendix).

To facilitate transition under the revised screening methodology, investors are given six (6) months from 29 November 2013, being the effective date of the List of Shariah-Compliant Securities, to dispose of securities that are excluded from the list, in the event that the respective market price of such securities exceeds or is equal to the investment cost.

During the six-month period, dividends received and capital gains realised from the disposal of such securities may be retained by investors, without the need to channel any portion of the dividends and capital gains to baitulmal and/or charitable bodies.

The full list, which is updated twice a year based on the companies’ latest annual audited financial statements, is now available here. The next updated list will be made available in May 2014.


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