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DSE's aim to sell Shariah index data fails investors

Only 5 asset management cos have paid to support their clients

Mohammad Mufazzal | March 12, 2023 00:00:00

Investors and stakeholders have no free access to the DSE Shariah index (DSES) as the Dhaka bourse has been managing it for the purpose of business.

Market operators pay the Dhaka Stock Exchange for information about the companies listed on the DSES to help their clients with Shariah-compliant investment decisions.

On the other hand, the Chittagong Stock Exchange (CSE) has kept its Shariah index accessible to all for free.

"We have not made the information public as part of our plan to sell data. In fact, all information are not available free of cost on the stock exchanges of other countries," said Mohammad Asadur Rahman, company secretary of the DSE.

So, investors, who would look out for Shariah-compliant companies, would have to go to the market operators that have purchased access to the data.

Market operators, especially asset management companies, are required to make a one-off payment of Tk 0.5 million for information of the DSES. In addition, they have to pay Tk 0.12 million every year to continue to have the access.

Five companies, including ICB Asset Management, Shanta Asset Management, LankaBangla Asset Management Company, and IDLC Asset Management have made the payments so they can provide specialized investment solutions.

Though the intermediaries need to pay for data, clients do not want to bear any cost for the services, said Md Ashequr Rahman, managing director at Midway Securities.

That is why, he said, "most of the market operators are unwilling to purchase information".

There are 58 asset management companies while the number of merchant banks is 67. Also, some 298 TREC (trading right entitlement certificate) holders, including new ones, many of which are yet to start operation, could assist investors in making Shariah-compliant investments if they had DSES data available.

"The [DSES] index should be open for all. Both the regulator and the DSE should promote it to change the perception of those who think the stock market is a bad place." The Dhaka bourse will be able to earn the money that it seeks to get from data subscriptions by increasing investor participation in the DSES, added Mr Rahman.

The Dhaka bourse launched the DSES in January 2014 with 1,000 base points and at the end of that day's session the index closed at 941.27 points.

Years later the DSES comprising about 70 companies closed at 1362.32 points on Thursday with a rise of 0.05 per cent or 0.74 point.

Regarding the Shariah index, the DSE website provides information about where it stands at the closing of a day's session and its daily ups and downs. It does not even give the list of the companies that fall in the category, let alone company-specific details.

The Standard and Poor's (S&P), a US-based financial services company, developed the new index.

The DSES needs to obey Shariah principles, meaning investments in businesses linked to selling alcohol, pork products, pornography or weapons, and gambling are not allowed.

It serves as the Shariah-compliant free float adjusted broad market benchmark. This index is a subset of the DSE Broad Market Index (DSEX) and includes all stocks that meet the conditions set.

Apart from the DSES, the premier bourse manages DSE broad index DSEX and DS30 comprising blue chips.

Salim Afzal Shawon, head of research of BRAC EPL Stock Brokerage, said the availability of any index depends on the intension of its formulator.

"S&P500 and Morgan Stanley maintain different indices. While some of those are available others are not," he said.

Morgan Stanley Capital International, an investment research firm, charges its clients to provide investment data and analytics services.

"The securities regulator will explore the issue and take necessary measures in this regard," said Mohammad Rezaul Karim, executive director of the Bangladesh Securities and Exchange Commission.

CSE's stance

Asif Ibrahim, chairman of the Chittagong Stock Exchange (CSE), said the bourse had opened the Shariah index for all so investors could be aware of the companies listed on the index.

"We think information regarding Shariah-compliant companies should be available for investors willing to invest in such securities," he added.

The CSE Shariah Index presently has 131 companies listed. The names of the companies and trade-related information are available on the website of the bourse.

The companies include Islami Bank Bangladesh, Al-Arafa Islami Bank, Islamic Finance & Investment, Islami Insurance Bangladesh, Grameenphone, RAK Ceramics (Bangladesh), TITAS Gas Transmission and Distribution Company, Aamra Networks, ACI Formulations, and Eastern Housing.

The index is reviewed on an annual basis and constituents that become non-compliant are excluded.

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