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Islamic indices continue to outperform conventional benchmarks globally
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US Markets power higher while Europe, Asia-Pacific and emerging markets weaken
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MENA equity markets sell off sharply in October & November, trimming 2014 gains
Most major Shariah compliant benchmarks continue to outperform their conventional counterparts in 2014 as information technology and healthcare – which tend to be overweight in Islamic indices – have been sector leaders, and financials – which are underrepresented in Islamic indices – have experienced some weakness. One notable exception has been in the Middle East where equity markets have very little exposure to information technology and healthcare and thus Shariah compliant indices have not benefited from the strength in these sectors.
Comparative price returns (2014 YTD) | |||
Shariah | Conventional | Variance | |
S&P Global BMI | 6.1% | 3.7% | 2.4% |
DJIM World | 6.6% | 4.0% | 2.6% |
S&P 500 | 12.3% | 11.6% | 0.7% |
DJIM Asia Pacific | 3.5% | -0.3% | 3.8% |
DJIM Europe | -3.1% | -4.9% | 1.7% |
DJIM Emerging Markets | 4.8% | 2.7% | 2.2% |
S&P Pan Arab Composite | 7.8% | 10.3% | -2.4% |
S&P Global BMI sector performance (2014 YTD) | |
GICS sector | Return |
Helath care | 16.8% |
Information technology | 11.5% |
Utilities | 10.3% |
Consumer staples | 5.3% |
Financials | 2.5% |
Consumer Discretionary | 0.3% |
Industrials | 0.2% |
Telecom services | 0.1% |
Materials | -4.5% |
Energy | -5.7% |
S&P Global BMI | 3.7% |
As of November 21, 2014, the Dow Jones Islamic Market World and S&P Global BMI Shariah Indices gained 6.6% and 6.1%, respectively, for the year, each outperforming their conventional counterparts by about 250bps. However, performance has been highly divergent across regions with the US up double-digits, while European regional indices are in the red. The Dow Jones Islamic Market Asia Pacific had been outperforming the US and other developed market regions through late August. However, Asian markets have cooled in the past three months, while the S&P 500 Shariah has reached new highs following a short-lived bout of volatility in October. Outside of MENA, where the S&P Pan Arab Composite Shariah has underperformed the conventional S&P Pan Arab Composite, all other major regional Shariah-compliant indices remain ahead of their conventional counterparts through the 21st November.
MENA equity markets have cooled markedly following substantial gains earlier in the year. After peaking on the 8th September, up nearly 26% for the year, the S&P Pan Arab Composite Shariah declined 14.3% through the 21st November, leaving its year-to-date gain at a more tepid 7.8%. Weakness was experienced across the region, although Saudi Arabia was a major driver of the negative performance.