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Screening criteria for Shariah Compliant Stocks

Muhammad Abubakar Siddique

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Overview of KMI - 30

  • Introduction

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  • Objective of Launch

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  • KMI – 30 Composition

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  • KMI – 30 Companies

absiddique111@gmail.com

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Overview of KMI - 30

Introduction:

    • KSE and Al-Meezan Investment Management Limited launched its first co-branded Islamic Index (KMI-30). KSE Meezan Index (KMI-30) comprises of those 30 companies which qualify the KMI Shariah screening criteria. The index was introduced on Karachi Stock Exchange in September 2008 and the base period for this Islamic index is June 30, 2008

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    • Al Meezan Investments provide its Shariah expertise, guidelines, skills and stocks screening towards the activities with regard to launching and continuation process of the Index. On the contrary, KSE provides maintenance and dissemination support for the index.

absiddique111@gmail.com

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Overview of KMI - 30

Objective of Launch:

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    • To provide investors suitable benchmark for returns on Shariah Compliant equity investments.

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    • To help shariah conscious people choose the profitable stocks which are Shariah Compliant.

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    • To provide a relevant benchmark to Islamic equity funds for comparing their performance.

absiddique111@gmail.com

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Overview of KMI - 30

KMI – 30 Index Composition:

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    • KMI – 30 Index comprises of 30 Shariah Compliant Companies.

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    • Shariah compliance is ensured through Stock Screening process conducted by Al-Meezan Investment Management Limited and counter checked by Capital Advisory division of Product Development & Shariah Compliance (PDSC )Department.

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    • Al Meezan Investments provide its Shariah expertise, guidelines, skills and stocks screening towards the activities with regard to launching and continuation process of the Index. On the contrary, KSE provides maintenance and dissemination support for the index.

absiddique111@gmail.com

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KMI-30, Effective from June 1,09

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S-NO.

SYMBOL

NAME OF COMPANY

S-NO.

SYMBOL

NAME OF COMPANY

 

 

 

 

 

 

1

OGDC

Oil & Gas Dev Co

16

FCCL

Fauji Cement

2

PPL

Pak Petroleum

17

BOSI

Bosicor Pakistan

3

FFC

Fauji Fertiliz Co.

18

PRL

Pak Refinery Limited

4

POL

Pak Oilfields

19

INDU

Indus Motor

5

PSO

P.S.O.

20

GLAXO

GlaxoSmithKline

6

HUBC

Hub Power Co. Ltd

21

MARI

Mari Gas Company

7

PTC

P.T.C.L.A

22

MTL

Millat Tractors

8

LUCK

Lucky Cement

23

PSMC

Pak Suzuki

9

ATRL

Attock Refinery Ltd.

24

PAEL

Pak Elektron

10

NML

Nishat Mills Limited

25

BOC

BOC (Pak)

11

ICI

ICI Pakistan

26

GHGL

Ghani Glass Ltd.

12

NRL

National Refin.

27

PIOC

Pioneer Cement

13

SNGP

Sui North Gas Pipe.

28

MLCF

Maple Leaf Cem.

14

SPL

Sitara Peroxide

29

ABOT

Abbott (Lab)

15

SSGC

Sui South Gas

30

BIPL

Bankislami Pakistan

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Stock Screening criteria

1: Business of the Investee Company

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    • The core business of the investee company should be Halal. Accordingly, investment in shares of conventional banks, insurance companies, leasing companies, companies dealing in alcohol etc are not permissible.

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Stock Screening criteria

2: Interest Bearing Debt < 40% of Total Assets

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    • Interest Bearing Debt includes Bonds, TFCs, Conventional Bank Loans, Finance Lease, Preference Shares etc.

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    • Total Interest bearing Debt must be less than 40% of the Total assets of the investee company.

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Stock Screening criteria

3: Non-Shariah Compliant Investments < 33% of Total Assets

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    • Non-Shariah Compliant Investments include investments in conventional mutual funds, conventional money market instruments, Bonds, PIBs, FIB, CoIs, CoDs, TFCs, DSCs, T-Bills, all Interest based placements and interest based loans and advances etc.

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    • Non-Shariah Compliant investments must be less than 33% of Total Assets of the investee company.

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Stock Screening criteria

4: Non-Compliant Income < 5% of Total Revenue

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    • Non Compliant Income includes Bank Interest, Income from gambling, nightclubs, prostitution, casino, tobacco, alcohol, dividend income from above mentioned businesses, dividend income from Shariah non-Compliant Companies etc.

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    • Capital Gain need not be purified.

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    • Non-Shariah Compliant income must be less than 5% of Total Revenue of the investee company.

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    • Total Revenue includes Gross Sales + Other Operating Income.

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    • Dividend Purification is done by disbursing amount in Charity calculated as per the Charity rate determined and approved by PDSC.

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Stock Screening criteria

5: Illiquid Assets/Total Assets > 0.20 or 20%

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    • Illiquid Assets include property, plant & equipment, building, furniture & fixture, Intangible Assets, Stock in trade, Stores and spares and all similar assets.

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    • Illiquid Assets must be at least 20% of the total assets of the Investee company.

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Stock Screening criteria

6: Market price/Share > Net Liquid Assets/Share

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    • Net Liquid Assets Per share = Total Assets – Illiquid Assets – Total Liabilities divided by Number of Shares Outstanding of the Investee Company.

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    • Market price per share should be greater than Net Liquid assets per Share.

absiddique111@gmail.com

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