Indonesia to introduce Shariah equities index

The Indonesian Shariah Stock Index is expected to debut on Wednesday.

“We will cooperate with the MUI [Indonesian Council of Ulema] to answer questions in local communities about whether it is halal or haram to invest in the stock market,” Frederica Widyasari Dewi, development director of the bourse, also known as the IDX, said on Tuesday.

Frederica said the ISSI would offer far more stocks that were judged to be Shariah-compliant than the Jakarta Islamic Index, which was established in 2000 and lists 30 companies.

The ISSI will consist of 214 stocks that are already listed on the IDX’s Jakarta Composite Index and which are considered Shariah-compliant, meaning their businesses do not deal in activities that contradict Islamic values, such as selling alcohol, gambling, speculation or profiting from interest payments.

“We want to show investors that our stock exchange’s activities are halal,” Frederica said.

The broader IDX includes 423 listed companies with a combined market capitalization of Rp 3,405 trillion ($398 billion). ISSI stocks will account for about 43 percent of the local bourse’s total value, Frederica said.

Among the companies expected to join the ISSI are palm oil producer Astra Agro Lestari, gold miner Aneka Tambang (Antam), state-owned steel maker Krakatau Steel, vehicle distributor Astra International, consumer goods producer Indofood CBP Sukses Makmur and state telecommunications operator Telekomunikasi Indonesia (Telkom).

Frederica said the stocks on the ISSI had secured a “halal” label from the MUI’s Shariah board, which she expected would encourage devout investors to put their money in the IDX.