Most S&P and Dow Jones Shariah-compliant benchmarks outperformed their conventional counterparts year-to-date through June 28, 2017 as Financials – which are largely absent from Islamic indices – have lagged the broader market, and Information Technology and Health Care – which tend to be overweight in Islamic Indices – have been the two top performing sectors so far this year.
Global equity markets added to strong Q1 gains as the Dow Jones Islamic Market World and S&P Global BMI Shariah Indices gained 13.6% and 13.3%, respectively for the year. Each index outperformed the conventional S&P Global Broad Market Index (BMI) by about 2.5%. In the U.S., the S&P 500 Shariah gained 10.4% for the year, outperforming the S&P 500 by 1.4%. Regional Dow Jones Islamic Market benchmarks for Asia-Pacific, Europe and Emerging Markets all beat their conventional counterparts by meaningful margins as well.
Asia-Pacific, Europe and Emerging Markets Lead Global Equity Markets Higher
Gains were broad based across global equity markets. However, Asia-Pacific, Europe and Emerging Markets have led the way as improved economic prospects and investor sentiment along with strengthening currencies contributed to high double-digit U.S. dollar denominated returns. Despite recently lagging other major regions, U.S. equity markets have remained strong as the S&P 500 recorded several new all-time highs in 2017 and was up 9.0% year-to-date through June 28.
Weak Oil Prices and Political Uncertainty Weigh on MENA Equities
After a strong finish to 2016, MENA equities have significantly lagged global equity markets in 2017 as falling oil prices and political uncertainty arising from the diplomatic rift between several Arab nations and Qatar weighed on the region’s equity markets. The S&P Pan Arab Composite Shariah eked out a gain of 1.0% year-to-date through June 27, matching the return of the conventional S&P Pan Arab Composite Shariah. The S&P Qatar BMI sank 13.2% over the same period with most of the losses concentrated following the June 5 flare up of diplomatic tensions.