by Gérard Al-Fil
The Dow Jones Islamic Market (DJIM) Indexes of the Arabian Gulf states seem to be identified with the oil & gas sector, even as they diversify. The indexes’ prices are still correlating with oil prices, despite their establishing of new industry sectors.
Oil prices recovered in February by 12% to around US$80 per barrel. As a result, the DJIM Kuwait Index topped the charts last month (as of the close of February 23) and ended 13.57% higher at 963.94 points. Kuwait also leads in relation to year-to-date change with a positive showing of 11.83%. The DJIM GCC Index is hard on its heels, closing at 1,304.72 points (gaining 8.49%).
The latter composite measures the performance of Shari’ah-compliant firms listed in six countries of the Gulf Cooperation Council (GCC): Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman.
Islamically pure, or halal, companies in China also started well in this, the Year of the Tiger. The DJIM China Offshore Index finished the second month of 2010 at 2,714.49 (6.73% higher). The IMF estimates the Chinese economy will grow by 10% this year, outperforming the world economy by 6.1%. A year ago, the government in Beijing launched a US$596 billion economic stimulus program to sustain its growth leadership in the BRIC (Brazil, Russia, India, China) and around the globe, while the Chinese central bank injected US$31.35 billion into the interbank market.
The DJIM Turkey Index was hit badly, closing 9.33% lower at 3,181.39 points. Also falling were the DJIM Indonesia (down 2.72% at 1,224.47 points) and the DJIM Europe Titans 25 indexes (down 1.88% at 2,038.34 points).
As a direct comparison, leading conventional composites could not catch up with the aforementioned Islamic indexes. Global bellwether Dow Jones Industrial Average closed up 2.14% at 10,282.41 points. The Dow Jones Europe Index lost 2.46%, ending at 243.25 points.
Regarding sector indexes, the DJIM Basic Materials Index led the charts by jumping 4.32% higher to 2,334.96 points. They were followed by the DJIM Technology Index (up 3.05% at 2,249.83 points). Both sectors are important in the Islamic fund management industry because Shari’ah-compliant stock universe, firms of the tobacco, alcohol, weapons, entertainment and conventional finance industry are judged as impermissible, or haram.
Oil and gas firms have not benefited by the recent recovery in energy prices (as yet). The DJIM Oil & Gas Index closed insignificantly lower, at 3,241.24 points. But this could change soon. Bank of America Merrill Lynch in Dubai expects oil prices to reach US$100 per barrel at the end of the year due to global inflationary pressure triggered by trillion-dollar-rescue-packages of governments to tackle the economic crisis. Such a hike in energy prices could fuel not only the performance of oil giants such as Exxon Mobil, ENI or Petro China, but also further advances at GCC stock market indexes.
Gérard Al-Fil is a financial journalist in Dubai. He works as a Middle Eastern correspondent for the Swiss financial website moneycab.com, for Dubai-based portal AME Info, for the Swiss banking magazine 'Schweizer Bank' and for the German weekly 'Euro am Sonntag'. He reported from the UAE, Kuwait, Bahrain, Qatar, Oman, Turkey, Iran and China. Gérard holds a diploma in business administration from University of Duesseldorf and a post-graduate diploma from the Institute of Islamic Banking and Insurance (IIBI) in London.
