Back to the complete issue
Tuesday, 28 June 2022

New sharia-compliant ETFs from Chimera + ETFs at large expose EMs to shocks

Our friends at Chimera Capital have launched two US sharia-compliant exchange-traded funds (ETFs), one for value stocks and the other for growth stocks listed on the S&P, according to a statement (pdf). The first of the Abu Dhabi-based investment management firm’s new indices will track the S&P Composite 1500’s 30 most liquid sharia-compliant value stocks, including Johnson & Johnson, Procter & Gamble, and Exxon Mobil. The second index will cover the S&P 500’s 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’ shares) are International Securities, EFG Hermes, Arqaam Capital, Daman Securities, and BHM Capital. BNY Mellon is the ETFs’ global custodian.

Speaking of ETFs: Their heavy penetration in emerging markets leaves EMs exposed to global shocks because “passive funds and ETFs investing in EMEs assets are more subject to redemption pressures during periods of market turbulence,” economists at Italy’s central bank said in a research paper.

For example: 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 “a reliable long-term source of investment that countries need,” Renaissance Capital Chief Economist Charles Robertson told the Financial Times.

Egypt saw that ETF volatility firsthand back in 2018 during the emerging market meltdown. 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.

ALSO IN PLANET FINANCE-

  • Tecom IPO was massively oversubscribed: Dubai business park operator Tecom Group drew USD 9.6 bn in orders for its USD 454 mn IPO as the Gulf IPO rush continues. (Bloomberg)
  • VW’s EV charging business worth bns of USD? Volkswagen is close to selling a minority stake in its US EV-charging business Electrify to a Siemens subsidiary. The transaction would value Electrify at more than USD 2 bn. (WSJ)

Up

EGX30

9,255

-2.0% (YTD: -22.5%)

Down

USD (CBE)

Buy 18.71

Sell 18.79

None

USD at CIB

Buy 18.73

Sell 18.79

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

11,427

-0.7% (YTD: +1.3%)

Up

ADX

9,268

+0.3% (YTD: +9.2%)

Up

DFM

3,218

+0.5% (YTD: +0.7%)

Down

S&P 500

3,900

-0.3% (YTD: -18.2%)

Up

FTSE 100

7,258

+0.7% (YTD: -1.7%)

Up

Euro Stoxx 50

3,539

+0.2% (YTD: -17.7%)

Up

Brent crude

USD 115.09

+1.7%

Down

Natural gas (Nymex)

USD 6.39

-1.8%

Down

Gold

USD 1823.90

-0.1%

Down

BTC

USD 20,716

-1.6% (YTD: -55.0%)

THE CLOSING BELL-

The EGX30 fell 2.0% at yesterday’s close on turnover of EGP 828 mn (0.1% above the 90-day average). Local investors were net buyers. The index is down 22.5% YTD.

In the green: Oriental Weavers (+0.8%) and Eastern Company (+0.6%).

In the red: GB Auto (-11.0%), Fawry (-9.6%) and Orascom Development Egypt (-7.2%).

Asian markets are up/down in early trading this morning and futures suggest xx

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.