Global Equity Active Shariah ETF Screened Report | March 2024

Shariah ETF Key Takeaways

Markets easily shrugged off the disappointment of delayed rate cuts and we have now entered that rarely seen territory where bad news is interpreted as good and good news is equally interpreted as good. Investors typically seem energized by news that implies weak economics and potential rate cuts or strong economies and growing earnings. Lately, either seems fine with daily returns flip-flopping between the long duration lower rates crowd (tech, biotech) and the strong economy and earnings stocks (industrials, consumer discretionary). Hung out to dry have been the highly leveraged, dividend-paying utilities. High debt and interest rates imply greater expenses, while investors can now achieve the same yields without taking the stock risk.

In February the Shariah ETF continued its positive performance, appreciating 4.33%, broadly in line with conventional global index performance but well ahead of global Islamic benchmarks. Atypically, energy contributed little to the performance gap as the sector performed in line with the overall benchmark. Instead, strong selection in Industrials and consumer discretionary, combined with exceptionally strong selection in healthcare were sufficient to overcome weaker technology performance due to the absence of Artificial Intelligence stars such as Nvidia. In Industrials returns were led by construction products distributor Ferguson, heat pump leader Trane, commercial HVAC provider Johnson Controls and French electrical specialist Schneider. Consumer discretionary was led by US home improvement specialist Lowe’s and car parts distributor Autozone. In healthcare performance was strong across the board with Eli Lilly the top contributor followed by Boston Scientific, Siemens Healthineers, Edwards Life, Novo Nordisk and Merck. We believe that each of these investments continues to feature attractive characteristics and anticipate holding them for several years to come.


Source of all performance data: HANetf / Bloomberg as of 29.02.2024. Additional sources available upon request. Please note that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.

Tough times in the Middle Kingdom

In early March, China will hold its annual National People’s Congress; a somnambulant affair during which delegates typically rubber stamp decisions taken by the Central Committee or, more recently, decisions taken by Xin Jinping and accepted by everyone else. At last year’s Congress, Xi was approved for an unprecedented third term as president. If we knew nothing else about China (bankrupt property companies, slowing growth, deflation, huge debts) Xi’s third term would make us wary of investing. Not for nothing did Deng Xiaoping establish the tradition of term limits following thirty years of Mao Zedong-inspired chaos. Ignoring that tradition places Xi in the company of leaders such as Vladimir Putin, Victor Orban, Fidel Castro, Kim Il-Sung and too many others to mention; leaders who overstayed their welcomes and whose countries suffer for it. We do, however, know a lot of other things about China. These include Xi’s belief in the primacy of state-controlled enterprise, the ”disappearing” of top officials such as the foreign and defense ministers, and the decision to cancel the premier’s news conference, an event that was one of the only times a top Chinese official took questions from the news media and which dated to 1993. Of course, we also know of Xi’s obsession with Taiwan. For these reasons, among others we find the risk return trade-off of investing in China unattractive and we do not hold any positions.

Shariah ETF Performance Table                                                                                                                
As of 29.02.2024

Saturna Al-Kawthar Global Focused Equity UCITS ETF4.33%12.32%14.00%6.24%27.43%4.18%11.08%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 29/02/2024. Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”)

before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

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