THE AGE: IN THE aftermath of the US financial crisis, the future is uncertain for Islamic investment in Australia.
While the impact of the global credit crisis has had a minor effect on sharia-compliant investments compared with debt-laden conventional bourses, some stocks that dominate Islamic indices have fallen.
And the lack of confidence in the banking and finance sector has made Islamic finance providers from the Middle East and South-East Asia hesitant to set up shop Down Under.
The Dow Jones Islamic Market Financials Index measures the performance of about 70 sharemarkets around the world that are sharia-compliant, or in line with Islamic ethics. "Conventional banks and insurance companies are banned from the DJIM universe," says Gerard al-Fil, a Dubai-based financial journalist and portfolio manager.
"Non-Islamic or haram sectors, such as alcohol, tobacco, weapons, pornography and gambling companies are likewise excluded."
The index lost 2.74% in September — a month in which conventional sharemarkets lost a fifth of their value. In that month, AIG, Fannie Mae and Freddie Mac all became de facto state-owned enterprises, while the Lehman Brothers declared bankruptcy and the Bank of America took over Merrill Lynch.
As sharemarkets around the world were rattled by the rapid changes on Wall Street, Islamic stocks also felt the impact.
Mr Fil says other asset-based investments might still drag down the Islamic indices. "The Islamic markets are very heavy on basic materials and raw materials and these prices dropped as well."
But Islamic stocks were sheltered from the most extreme jolts to the global financial market, by a historical and theological tendency to avoid credit.
"Islamic stocks operated in the wider global stockmarkets, so the effects of the crisis will be felt," says Hussain Rammal, a lecturer in international business at University of Adelaide. >>> Nasya Bahfen | October 23, 2008
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