Dow Jones Citigroup Sukuk Index: the First Islamic Bond Index

Dow Jones Islamic Market Index introduced in 1999 includes stocks of companies which are not considered suitable for Islamic investing. Incompatible lines of business include : alcohol, pork-related products, conventional financial services (banking, insurance, etc.), entertainment (hotels, casinos/gambling, cinema, pornography, music, etc.), and tobacco manufacturers or defense and weapons companies.

After indexing in stock market now in bond market, the new Dow Jones Citigroup Sukuk Index or the first Islamic Bond Index will be launched on 2 April 2006.

Dow Jones Indexes and Citigroup Corporate and Investment Banking, both leading global index providers, today announced that they intend to launch the Dow Jones Citigroup Sukuk Index, the first index that seeks to measure the performance of global bonds complying with Islamic investment guidelines.

The index, which is intended to launch April 2, was created primarily for use as the benchmark for investors seeking exposure to Shari’ah-compliant fixed-income investments. In addition, the index may serve to increase secondary market trading in this growing asset class and facilitate cross-market relative value trading among different asset classes.

The Dow Jones Citigroup Sukuk Index will include investment-grade, U.S. dollar-denominated Islamic bonds – also known as Sukuk – issued in the global market. At launch, the Index initially will track seven issues: Islamic Development Bank, Solidarity Trust Services Ltd, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk.

To be included in the Index, an Islamic bond must comply with both Shari’ah law and the Bahrain-based Auditing & Accounting Organization of Islamic Financial Institutions (AAOIFI) standards for tradable Sukuk. Once a bond meets these criteria, Dow Jones Indexes and Citigroup will apply market-based criteria such as minimum maturity of one year, minimum issue size of US$250 million, and an explicit or implicit rating of at least BBB-/Baa3 by leading rating agencies.

“Sukuk, or Islamic fixed-income securities, have emerged over recent years as an increasingly important asset class. It can be expected that we will see the issue of a significant number of corporate, quasi-sovereign and sovereign Sukuk in the future, along with the development of a liquid and efficient Islamic capital market,” said Michael A. Petronella, president, Dow Jones Indexes/Ventures. “The co-operation with Citigroup to calculate and market the Dow Jones Citigroup Sukuk Index combines experience in the Islamic bond market with expertise in Islamic finance and indexing.”

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