UAE's first ETF tracking Sharia-compliant index lists on UAE markets

The Chimera S&P UAE Sharia ETF will have two different share classes that will track a Sharia-compliant index compiled from stocks listed in Abu Dhabi and Dubai

An investor monitors a screen displaying stock information at the Abu Dhabi Securities Exchange June 25, 2014. The spectacular rise and fall of Arabtec, Dubai's most heavily traded stock, teaches hard lessons about how risky the region remains for investors even as its rapid economic growth lures billions of dollars in fresh funds from abroad. Wild trading by local retail investors who dominate activity, plus weak corporate disclosure and a hands-off approach by regulators, can make a toxic mix, and on occasion destabilise entire markets.  REUTERS/Stringer  (UNITED ARAB EMIRATES - Tags: BUSINESS) - GM1EA6P1SB001

The UAE's first exchange traded fund tracking a Sharia-compliant index began trading on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market on Monday.

Chimera Capital, an Abu Dhabi-based asset management firm wholly owned by Chimera Investments, listed its Chimera S&P UAE Shariah ETF – Share Class A in Abu Dhabi, ADX said in a filing. A separate listing for Share Class B took place on the DFM. Both track a Sharia-compliant index compiled from local stocks listed in Abu Dhabi and Dubai.

"We are pleased to bring to market the first ETF tracking a Sharia-compliant index in the UAE, which opens a new wholesale investment opportunity to a unique investor profile," a Chimera Capital executive said. "The Chimera S&P UAE Shariah ETF will allow investors to capitalise on the prospects of the UAE's economy."

Bourses in the the region are ramping up efforts to diversify their product offerings to attract more foreign direct investment and boost trading activity as their economies seek to recover from lower oil prices and the impact of the coronavirus. Last month, ADX chief executive Khaleefa Al Mansouri told The National that there would be an ETF listing on the exchange in August.

The new ETF's Class-A shares listed on the ADX will reinvest income into the fund. The Class-B shares listed on the Dubai Financial Market (DFM) will distribute any collected dividends to investors.

Both are designed to replicate the S&P UAE Domestic Shariah Liquid 35/20 Capped Index, which has members including Dubai Islamic Bank.

The Chimera S&P UAE Shariah ETF is structured and built by S&P and monitored by a Shariah board that meets regularly to review and re-balance the index quarterly, ensuring that the securities in the index are liquid and Sharia-compliant. The fund will be managed by Chimera Capital.

Currently the index has ten securities across the two UAE markets.

The fund's top holdings include Emirates Telecommunications Group with the biggest weighting of 33.63 per cent, Dubai Islamic Bank, Emaar Properties, Abu Dhabi Islamic Bank and Aramex.

Other holdings include Dana Gas, Emaar Malls Group, Deyaar Development, Eshraq Properties and Islamic Arab Insurance Company, according to a statement on the DFM.

The fund has a total market capitalisation of Dh234 billion and assets under management of Dh934,839, according to Chimera's website.

"With a primary listing on ADX, it is a new opportunity for Islamic investors to add variety to their portfolios and manage risk more effectively," Mr Al Mansouri said.

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