Kazakhstan’s ITS Exchange Lures Islamic Investors With Shariah Index

ITS, the newly inaugurated international trading platform in Kazakhstan, has taken bold strides since its launch in early June. Aimed at enticing Islamic investors, the platform has introduced the ITS Shariah stock index, a curated list of 30 shares from globally renowned companies, all in strict adherence to Shariah standards. This announcement came directly from the desk of ITS’s managing director this Thursday.

Debuting on June 7, ITS operates under the auspices of the Astana International Financial Center. It is envisioned as an international liquidity nexus, enabling investors, both local to Kazakhstan and global, to actively trade in over 1,600 shares listed across the United States and Hong Kong. This platform boasts an extensive 16-hour trading session, ensuring maximum flexibility for its users.

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Alexander Diakovsky, the dynamic managing director of ITS and the chief of information services development, shed light on the positive reception of ITS’s novel index initiative. He remarked that the professional stock market community in Kazakhstan perceives this as an instrumental step towards cultivating the equity-traded funds (ETFs) industry, grounded on these indexes.

Delving deeper, ITS functions as a multilateral trading facility (MTF), a distinct departure from the workings of classic stock exchanges, as it doesn’t facilitate initial public offerings. This unique platform launched two dollar-denominated indexes – the ITS World Index and the ITS Shariah Index – on August 10. These indexes offer real-time calculations, based on trading activities from 11:00 to 03:00 Astana time (05:00-21:00 GMT). Notably, ITS’s liquidity level ensures seamless index calculation, rivaling the fluidity experienced on major U.S. platforms.

Discussing the ITS World Index, Diakovsky emphasized its stature as the predominant flagship index. It monitors the stock activities of the top 50 companies spanning America, Europe, Asia, and including firms from Kazakhstan. Meanwhile, the ITS Shariah Index, a pioneer in both Kazakhstan and Central Asia, focuses on the stock performance of 30 top-tier companies trading on ITS, all compliant with Shariah guidelines. This index was meticulously crafted in partnership with Sahih Invest, a leading independent Shariah specialist accredited by the Accounting and Auditing Organization for Islamic Financial Institutions.

Highlighting its major players, the ITS Shariah Index includes eminent companies like Tesla, Visa, Exxon Mobil, Amazon, Johnson & Johnson, Procter & Gamble, Chevron, Merck & Co, Pfizer, and Salesforce. ITS ensures the index’s vitality through a monthly review.

Analyzing the ITS Shariah Index, Diakovsky pointed out its diverse nature in terms of industry representation and the concentration of international giants. Statistics reveal the top 10 securities account for 40% of the index, while the top 20 constitute 60%. Moreover, the issuer concentration remains capped at 10%.

Reviewing historical data from May 7, 2020, to August 9, 2023, the ITS Shariah Index mirrors the dynamics of prominent global Shariah indexes and notably outpaces gold, as per ITS metrics.

“We anticipate this index garnering significant attention from Muslim investors in Central Asia,” Diakovsky commented. He noted that approximately 70% of Kazakhstan’s populace practices Islam, with higher percentages in surrounding regions. Further, Islam’s appeal to the region’s young and economically active demographic imposes unique investment prerequisites.

In a forward-looking move, ITS, in collaboration with Kazakhstan’s financial market stakeholders, is poised to unveil ETFs based on these indexes in 2024’s first half. Diakovsky believes this endeavor could metamorphose Kazakhstan’s financial milieu, cementing its position as Central Asia’s epicenter for ETF industry evolution.

Diakovsky concluded, “The forthcoming role of this instrument in the Central Asian financial sphere remains to be seen. However, it’s evident that the investment landscape across the Great Silk Road nations is undergoing a transformative phase, heralding unprecedented changes.”