Egypt’s CI Asset Management Chief Investment Officer Tarek Shahin expressed surprise to IFN Investor that hotels have been included in the EGX33 Shariah Index launched by the Egyptian Exchange (EGX).
This firm had so far excluded hotels from its own Shariah compliant fund offerings on the basis that the serving of alcohol is not allowed by Islam.
Noting the EGX33 Shariah Index committee decided otherwise, Tarek said the inclusion of two major hotel-related firms in the EGX33 Shariah Index is “a good development”, and he is awaiting further clarification from regulators on how the Shariah compliance for hotels was made possible.
The two hotel stocks included in the EGX33 Shariah Index are the Talaat Moustafa Group, which is a real estate developer but hotels are increasingly becoming a greater part of the group’s business, and Orascom Development, famous for the El Gouna resorts along the Red Sea and also known for its hotels and leisure projects.
“You would not have seen Orascom on any of the Islamic funds and now, that conversation is changing.”
CI Asset Management is keen on the new index, having drawn many clients with its conventional index tracker fund since 2022. It was quick to spot the potential to launch another tracker fund when the EGX outlined plans in January 2024 for the nation’s Cairo and Alexandria stock exchanges —mentioning its intention to release a Shariah index.
Leveraging on the success of its index-tracker Egypt Equity Fund launched in October 2022, the CI Asset Management team immediately started on designing a new index fund — with initial proposal documents submitted to Egypt’s Financial Regulatory Authority (FRA) by early April 2024.
“We also wrote to the stock market board to show our support for that Shariah index by creating a product around it. We wanted to persuade them to show impetus by giving this initiative a priority and not treat it as just another academic exercise.”
Hence, when the EGX33 Shariah Index was unveiled on the 12th June 2024, CI Asset Management was ready to submit the index constituent list to complete its fund submission proposal to the FRA.
Tarek said the FRA can take up to two months to do a complete review — especially since this is a new innovative product for the stock exchange. Extra time may be needed for the FRA to ask for certain clarifications, which could probably need to come from the EGX as well.
“We are looking forward to launching this tracker fund as soon as possible after getting the FRA approval, hopefully by Q3 2024.” The EGX33 Shariah Index is seen by many in the domestic capital market as a major step forward as Egypt is probably the only market with a sizeable Islamic fund industry that does not have a regulator-sanctioned Shariah board like Malaysia, the UK or Saudi Arabia, said Tarek.
