Global Equity Active Shariah ETF Screened Report | June 2024

Shariah Active ETF Key Takeaways

Following April weakness global stock markets performed well in May. Within Islamic benchmarks, performance was broad-based with most sectors registering positive returns, the exceptions being Consumer Discretionary and Energy. Energy’s weight in Islamic benchmarks and the negative return was the differentiating factor between Islamic and conventional performance.

The weakness in Consumer Discretionary presents one piece of a complicated economic picture. Consumer confidence remains low in many countries, most notably the United States; strange given that the US has experienced one of the more robust post-covid recoveries, while employment and wage growth have remained strong. Nonetheless, the corrosiveness of the high inflation experienced as a result of the pandemic, combined with the fact that falling inflation still means rising prices, have frustrated consumers. Higher interest rates than most people have experienced in decades have exacerbated the issue, especially in the housing market where years of underbuilding and tight supply have stretched housing affordability.

In May the Shariah Active ETF appreciated 2.81%, well ahead of global Islamic indexes, while trailing conventional global benchmarks. Stock allocation rather than selection was the driving force of May performance. We are overweight the benchmark in Communications, which was the best performing sector during the month. Our returns were led by Nintendo’s double-digit percentage gain. We are also overweight Industrials, another strong performer. Johnson Controls and Schneider Electric were the Industrial drivers. We are most overweight the Healthcare sector at roughly double the benchmark’s 12% exposure. The strength of Eli Lilly and Novo Nordisk have been instrumental to returns for several quarters. While still appreciating, the pace has slowed, and our Healthcare selections overall trailed the benchmark. Technology represents our largest sector exposure and here we suffered from weakness among Intuit, Adobe, ServiceNow and Cisco. As noted above, Consumer Discretionary performance was weak, and our returns were eroded by Lululemon, Autozone and Lowe’s.

Source of all performance data: HANetf / Bloomberg as of 31.05.2024. 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.

A change in regime?

In five months, the United States will hold a presidential election, making it time to start thinking about the ramifications of the outcome on economies and stock markets.

Somewhat surprisingly, President Biden has maintained several of the protectionist trade policies adopted by the Trump Administration, most recently applying tariffs on Chinese electric vehicles. That said, a Biden victory would represent continuity. Trade with Europe and Japan remains friendly, while the US stays engaged with NATO, supportive of Taiwan and focused on continuing the energy transition to blunt the effects of global warming.

Taking him at his word, a new Trump administration implies a ratcheting up of protectionist policies, such as a 10% across-the-board tariff, the abandonment of Ukraine, a questionable commitment to NATO, a clampdown on immigration, rolling back alternative energy development, and boosting support for the oil and gas industries. A Trump administration might look askance at the weakening of the Japanese yen over the past three years, placing that country’s recovery in jeopardy. Clearly, a Trump administration could negatively affect many companies and we will be reviewing the portfolio for risks and opportunities.

Shariah Active ETF Performance Table                                                                                                                
As of 31.05.2024

Saturna Al-Kawthar Global Focused Equity UCITS ETF2.81%1.81%14.35%8.16%21.31%-1.92%13.08%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2024. 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.

For more information, visit the webpage for our Shariah Active ETF.

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