How to Get Started with Shariah Compliant Stocks in Malaysia
What are Shariah Compliant Stocks?
Stocks complying with Shariah standards are known as “Shariah compliant” and those not complying with the Shariah standards are known as Shariah Not Compliant.
What is the Shariah Screening Process?
Shariah Screening process is an examination conducted for companies listed on stock exchanges to know whether they are compliant with the Shariah norms or not.
The screening removes all the stocks that are not acceptable for investment, including those that deal with conventional Interest based products, liquor, gambling, and other prohibited activities as per the Shariah screening criteria set by Shariah scholars.
The screening process focuses on the business activities of the company and the financial ratios. While the former deals with knowing whether the company receives its revenue from prohibited or acceptable sources, the latter deals with investigating the financial position of the company.
About Malaysia
Malaysia is known as a HALAL HUB for Shariah Compliant Products in the world and has been a pioneer in issuing many Shariah compliant products and frameworks.
Malaysia is largely regarded as a leader for innovation in various HALAL and Islamic finance products.
A prominent country in Southeast Asia, Malaysia has 13 states and 3 federal territories. Let us now talk about the stock exchange of Malaysia, the Bursa Malaysia and its Shariah compliance statistics
About Bursa Malaysia
The stock exchange of Malaysia, Bursa Malaysia, is situated in the city of Kuala Lumpur. Previously it was called the Kuala Lumpur Stock Exchange.
With a total market cap of about $397.39 billion, Bursa Malaysia is the 25th largest stock exchange in the world. The shares trade in the Malaysian currency – Malaysian Ringgit that is denoted by MYR.
Bursa Malaysia mainly works through three markets
| Main Market | ACE market | LEAP Market |
|---|---|---|
| This is the main market where shares are traded in general. | ACE (Access, Certainty, Efficiency) is meant for start-ups and new companies which intend to go public. | This is an alternative market suitable for SMEs to raise funds |
The stock exchange houses various types of Shariah Compliant products and has a dedicated team to manage and promote Islamic capital market products and trading platforms as mentioned below:
This is a trading platform that facilitates for financing and investing in sharia compliant commodity products on BSAS, a number of commodities approved by Shariah Board of the Shariah Advisory Council of Securities Commission Malaysia are listed.
Bursa Malaysia-i offers exchange related services including listing, trading, depository, clearing and settlement to enhance existing infrastructure to incorporate shariah compliant features
Islamic Capital Market in Malaysia accommodates the below:
i -Stocks (Shariah Compliant Listed Equities )
i-ETFs (Shariah-compliant Exchange Traded Funds)
i-REITs (Shariah-compliant Real Estate Investment Trusts)
ETBS (Exchange Traded Bonds and Sukuk)
Others (Business Trusts, Stapled Securities)
Here you can access list of Shariah Compliant stocks approved by the SHARIAH ADVISORY COUNCIL
Number of Stocks listed on Bursa Malaysia
According to the latest data, a total of 801 companies were listed on the Malaysian stock exchange, the Bursa Malaysia. Out of them, 305 stocks are Shariah Compliant.
Shariah Compliance Stocks in Malaysia (Hover to view more details)
What is the Shariah Screening Criteria for Bursa Malaysia?
Shariah screening criteria in Malaysia have various norms, Industry wise, to pass sector screening. It is worthty to note that the accounting ratios to examine the compliance status has been recently removed from the criteria. To know more details, please read this
Bursa Malaysia Shariah Index
There are two types of Shariah indices in Malaysia. One of the FTSE Bursa Malaysia EMAS Shariah Index and the other is the FTSE Bursa Malaysia Hijrah Shariah Index. The former deals with those elements that are screened according to the SAC of the Malaysian Securities Commission.
The Hijrah Shariah Index deals with those elements that are screened by the SAC and also by a third party Shariah advisor, Yassar Ltd., as per a clear set of guiding principles.
Shariah Investing in Malaysia
For all those who are willing to invest in Shariah compliant stocks in Malaysia, we are here for you! Our Islamicly app will give you all the details of the various stocks that are compliant with the Shariah law.
Our team thoroughly goes through the available stocks and ensures that they are Shariah compliant so that you do not have to track them individually. You can check out the entire list on our app.
More interesting information and blogs are just on the way! Keep reading this space! Do reach out to us if you need any assistance regarding the information on Shariah compliant stocks.
