{"id":547602,"date":"2022-06-28T04:27:21","date_gmt":"2022-06-28T04:27:21","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/06\/28\/new-sharia-compliant-etfs-from-chimera-etfs-at-large-expose-ems-to-shocks\/"},"modified":"2022-06-28T04:27:21","modified_gmt":"2022-06-28T04:27:21","slug":"new-sharia-compliant-etfs-from-chimera-etfs-at-large-expose-ems-to-shocks","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/06\/28\/new-sharia-compliant-etfs-from-chimera-etfs-at-large-expose-ems-to-shocks\/","title":{"rendered":"New sharia-compliant ETFs from Chimera + ETFs at large expose EMs to shocks"},"content":{"rendered":"

<\/a> Our friends at Chimera Capital have launched two US sharia-compliant <\/strong>exchange-traded funds (ETFs)<\/strong>, one for value stocks and the other for growth stocks listed on the S&P, according to a statement (pdf)<\/a>. The first of the Abu Dhabi-based investment management firm\u2019s new indices will track the S&P Composite 1500\u2019s 30 most liquid sharia-compliant value stocks, including Johnson & Johnson, Procter & Gamble, and Exxon Mobil. The second index will cover the S&P 500\u2019s 30 biggest sharia-compliant value-stock constituents, such as Apple, Tesla, and Amazon. Chimera will list both ETFs on the ADX, giving investors direct access to the US market. Authorized participants (who can create and redeem the ETFs\u2019 shares) are International Securities, EFG Hermes, Arqaam Capital, Daman Securities, and BHM Capital. BNY Mellon is the ETFs\u2019 global custodian.<\/p>\n

Speaking of ETFs: Their heavy penetration in emerging markets leaves EMs <\/strong>exposed to global shocks<\/strong> because \u201cpassive funds and ETFs investing in EMEs assets are more subject to redemption pressures during periods of market turbulence,\u201d economists at Italy\u2019s central bank said in a research paper<\/a>.<\/p>\n

For example:<\/strong> When markets are volatile, passive funds were more likely than active funds to drop EM bonds, the researchers found in their analysis of global market data. ETFs tend to be fickle with their investments, meaning they are not \u201ca reliable long-term source of investment that countries need,\u201d Renaissance Capital Chief Economist Charles Robertson told the Financial Times<\/a>.<\/p>\n

Egypt saw that ETF volatility firsthand back in 2018 during the emerging market <\/strong>meltdown.<\/strong> Our portfolio investments had jumped to USD 70 bn in 2018 from USD 70 mn in 2016. Around half of these investments left the country in mid-2018, only to flow back a year later, Robertson notes.<\/p>\n

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