The Philippine Stock Exchange (PSE) developed its Shariah compliance program in line with its goal of expanding the investor base of the Philippine stock market. About 11% (as of 2011) of the population in the Philippines are Muslim Filipinos. The Shariah program aims to attract Muslim investors in the Philippines and worldwide through opening up more investment opportunities in the local capital market.
Shariah compliance at the PSE
The PSE engaged the services of IdealRatings to screen securities for Shariah compliance. IdealRatings is a provider of Islamic finance information that specializes in screening securities for Shariah compliance. The screening process is in accordance with the standards stipulated by AAOIFI, and includes business screening and financial ratios screening to determine Shariah compliant companies.
Generally, the nature of a company’s primary business must not involve any of the prohibited activities such as conventional interest-based financial institutions, pork, alcohol, intoxicants, tobacco, arms and weapons, gambling, casinos, derivatives, adult entertainment, music and human stem cell research, to become Shariah compliant. Any revenue derived from these activities must not exceed 5% of its gross revenue.
The AAOIFI standards also stipulate the maximum tolerance for financial ratios of the company as a percentage to market capitalization. The company’s interest-bearing debt as well as the total amount of interest-bearing deposits/investments should not exceed 30% against its 12-month trailing average market capitalization. Meanwhile, a company’s accounts receivable should not exceed 67% against its 12-month trailing average market capitalization.
Shariah compliant securities
The first list of Shariah compliant securities at the PSE was launched on the 16th December 2013 with 49 securities. Securities are screened for Shariah compliance on a quarterly basis. Qualified securities are disseminated to the public through the PSE website.
As of October 2015, there are 58 Shariah compliant securities (57 companies) which account for 21.7% of all listed companies at the PSE. These securities have an aggregate market capitalization (MCAP) of PHP2.84 trillion (US$60.05 billion) or 20.8% of the total MCAP of all listed securities as of the 15th October 2015.
Table 1: List of Shariah compliant securities as of October 2015 |
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|
Company Name |
Stock Code |
Sector |
Subsector |
1 |
A. Soriano Corporation |
ANS |
Holding firms |
Holding firms |
2 |
Abra Mining and Industrial Corporation |
AR |
Mining and oil |
Mining |
3 |
Apex Mining Company |
APX |
Mining and oil |
Mining |
4 |
Araneta Properties |
ARA |
Property |
Property |
5 |
Asian Terminals |
ATI |
Services |
Transportation services |
6 |
ATN Holdings ‘A’ |
ATN |
Holding firms |
Holding firms |
7 |
ATN Holdings ‘B’ |
ATNB |
Holding firms |
Holding firms |
8 |
Centro Escolar University |
CEU |
Services |
Education |
9 |
Cirtek Holdings Philippines Corporation |
TECH |
Industrial |
Electrical components and equipment |
10 |
Concepcion Industrial Corporation |
CIC |
Industrial |
Electrical components and equipment |
11 |
Crown Asia Chemicals Corporation |
CROWN |
Industrial |
Chemicals |
12 |
D&L Industries |
DNL |
Industrial |
Food, beverage and tobacco |
13 |
Da Vinci Capital Holdings |
DAVIN |
Industrial |
Construction, infrastructure and allied services |
14 |
DMCI Holdings |
DMC |
Holding firms |
Holding firms |
15 |
Easycall Communications Philippines |
ECP |
Services |
Other services |
16 |
EEI Corporation |
EEI |
Industrial |
Construction, infrastructure and allied services |
17 |
Far Eastern University |
FEU |
Services |
Education |
18 |
Global Ferronickel Holdings |
FNI |
Mining and oil |
Mining |
19 |
Globe Telecom |
GLO |
Services |
Telecommunications |
20 |
Holcim Philippines |
HLCM |
Industrial |
Construction, infrastructure and allied services |
21 |
iPeople |
IPO |
Services |
Education |
22 |
IRC Properties |
IRC |
Property |
Property |
23 |
Island Information and Technology |
IS |
Services |
Information technology |
24 |
Jollibee Foods Corporation |
JFC |
Industrial |
Food, beverage and tobacco |
25 |
Keppel Philippines Properties |
KEP |
Property |
Property |
26 |
Lafarge Republic |
LRI |
Industrial |
Construction, infrastructure and allied services |
27 |
Liberty Flour Mills. |
LFM |
Industrial |
Food, beverage and tobacco |
28 |
Liberty Telecoms Holdings |
LIB |
Services |
Telecommunications |
29 |
Mabuhay Vinyl Corporation |
MVC |
Industrial |
Chemicals |
30 |
MacroAsia Corporation |
MAC |
Services |
Transportation services |
31 |
Manila Bulletin Publishing Corporation |
MB |
Services |
Media |
32 |
Manila Electric Company |
MER |
Industrial |
Electricity, energy, power and water |
33 |
Marcventures Holdings |
MARC |
Mining and oil |
Mining |
34 |
Minerales Industrias Corporation |
MIC |
Holding firms |
Holding firms |
35 |
Nickel Asia Corporation |
NIKL |
Mining and oil |
Mining |
36 |
Now Corporation |
NOW |
Services |
Information technology |
37 |
Oriental Peninsula Resources Group |
ORE |
Mining and oil |
Mining |
38 |
Pepsi-Cola Products Philippines |
PIP |
Industrial |
Food, beverage and tobacco |
39 |
Philex Mining Corporation |
PX |
Mining and oil |
Mining |
40 |
Philippine H2O Ventures Corporation |
H2O |
Industrial |
Electricity, energy, power and water |
41 |
Philippine Long Distance Telephone Company |
TEL |
Services |
Telecommunications |
42 |
The Philodrill Corporation |
OV |
Mining and oil |
Oil |
43 |
Robinsons Land Corporation |
RLC |
Property |
Property |
44 |
Roxas and Company |
RCI |
Industrial |
Food, beverage and tobacco |
45 |
SBS Philippines Corporation |
SBS |
Services |
Other services |
46 |
Semirara Mining and Power Corporation |
SCC |
Mining and oil |
Mining |
47 |
SPC Power Corporation |
SPC |
Industrial |
Electricity, energy, power and water |
48 |
SSI Group |
SSI |
Services |
Retail |
49 |
Starmalls |
STR |
Property |
Property |
50 |
STI Education Systems Holdings |
STI |
Services |
Education |
51 |
Swift Foods |
SFI |
Industrial |
Food, beverage and tobacco |
52 |
United Paragon Mining Corporation |
UPM |
Mining and oil |
Mining |
53 |
Universal Robina Corporation |
URC |
Industrial |
Food, beverage and tobacco |
54 |
Vitarich Corporation |
VITA |
Industrial |
Food, beverage and tobacco |
55 |
Vivant Corporation |
VVT |
Industrial |
Electricity, energy, power and water |
56 |
Vulcan Industrial and Mining Corporation |
VUL |
Industrial |
Construction, infrastructure and allied services |
57 |
Wellex Industries |
WIN |
Holding firms |
Holding firms |
58 |
Xurpas |
X |
SME |
SME |
Source: PSE |
Of the 58 Shariah compliant securities, 21 issues or 36% are classified under the industrial sector; 15 issues or 26% are under the services sector; 10 companies or 17% are from the mining and oil sector; six securities or 10% are from the holding firms sector; and five or 9% are from the property sector. One Shariah compliant security is classified under the small, medium, and emerging boards.
Moving forward
The PSE continues to include Islamic investing in its market education campaign especially in the conduct of roadshows. The exchange is also currently studying the possibility of launching a Shariah index to aid investors in tracking the performance of PSE’s Shariah compliant stocks. Fund managers may also utilize such an index to create Shariah-based ETFs.
Adopting the Shariah compliance screening process is PSE’s thrust to encourage Muslim Filipinos and fund managers who use Shariah as ethical filters to invest in the Philippine stock market and participate in the growth of the Philippine economy through equity investments.
The article was contributed by the Business Development Department of the Philippine Stock Exchange and queries can be directed to [email protected].