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Turkey's first Islamic fund to track Gulf finance

DUBAI – Bloomberg | 1/31/2011 12:00:00 AM |

Turkey’s first Islamic fund, run by Istanbul-based brokerage Bizim Securities, is seeking to attract more investment from the Persian Gulf with its Shariah-compliant stock index.

Turkey’s first Islamic fund, run by Istanbul-based brokerage Bizim Securities, is seeking to attract more investment from the Persian Gulf with its Shariah-compliant stock index.

The Istanbul Stock Exchange started an Islamic gauge of 30 shares on Jan. 6. Bizim, whose parent company Boydak Holding owns shares in companies including an Islamic bank, is planning to raise 100 million Turkish Liras and through investments set to begin in the second half of 2011, Deputy Chief Executive Avşar Sungurlu said in an interview last week.

“Turkey is an increasingly attractive investment destination, particularly with investors in the Middle East and North Africa,” Akber Khan, a director at Al Rayan Investment in Doha, Qatar, said in a telephone interview Jan. 27. “The overall investment case for Turkey for medium to long-term investors is compelling. Strong medium-term growth dynamics are driven by positive demographic trends and rising gross domestic product per capita.”

Turkey, where more than 99 percent of the 73.7 million-person population is Muslim, is seeking to tap investments from the $1 trillion Islamic finance industry and last April allowed companies to issue sukuk, or Islamic bonds. Accelerating growth helped push the ISE National 100 share index up 21 percent in dollar terms last year, compared with a 16 percent increase for the MSCI Emerging Markets Index. The economy may expand 8 percent in 2010 after contracting 4.7 percent the previous year, Trade Minister Zafer Çağlayan said Dec. 10.

Bizim, which manages 600 million liras worth of investments, is the stock exchange’s sole adviser on the Shariah-compliant Participation Index. The brokerage’s investment fund will track the index, Sungurlu said. Banks and pension providers will be able to set up similar funds linked to the index as there are no legal restrictions on products tracking it, he said.

The Participation Index, which started with a market value of 20 billion liras, is comprised of companies that have pledged to refrain from selling alcohol, tobacco, pork and weapons, or to engage in gambling activities. They include Enka, an Istanbul-based builder, Turk Telekomunikasyon, Turkey’s biggest fixed-line operator, Ford Otomotiv, the Turkish unit of Ford Motors, and Asya Katılım Bankası, an Islamic bank.

[HH] ‘Not suitable’

Assets held by Shariah-compliant funds are estimated to be worth $52.3 billion, Ernst & Young said in its Islamic Funds and Investment Report in May, and companies and governments in the Middle East and Asia have introduced Shariah-compliant stock indices and funds to attract inflows.

Not all investors will buy into a fund tracking the Islamic index, according to Istanbul-based Garanti Asset Management.

“This index is not very suitable for my client portfolio,” İlhan Timur, senior portfolio manager at Garanti Asset, who helps manage 6 billion liras, said in an emailed response to questions from Bloomberg. “I don’t expect it to outperform the ISE-100 Index, but it may help attract more foreign investors from the Middle East.”

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