Shariah ETF Report | May 2024

Shariah Active ETF Key Takeaways

2024’s string of positive monthly stock market returns came to an end in April as hopes for lower rates evaporated in the face of resilient inflationary pressures and steadily increasing government bill/bond yields. While a strong economy, low unemployment, and wage growth are obvious positives, rising valuations rather than earnings have supported market performance. Those company results that appeared in April demonstrated surprisingly modest revenue and profit increases.

In the context of global Islamic benchmarks, market declines were broad based with Real Estate, Technology, Healthcare and Consumer Services suffering the weakest returns. Positive returns were registered by Utilities, Energy and Consumer Staples. In terms of contributions to benchmark returns, Utilities were a rounding error due to their small representation. While Consumer staples enjoyed better returns than Energy, the latter’s higher weight in the benchmark (~15%) meant the contributions to returns were similar.

In April the Shariah Active ETF declined -2.75%, in line with to slightly better than global Islamic indexes and ahead of conventional global benchmarks. Despite the absence of Energy investments, the ETF performed well on the back of strong selection among our Technology and Healthcare investments, which are the two largest exposures. Tyler Technology, a software provider to US state and local governments, Taiwan Semiconductor and analog chip maker Texas Instruments, all registered positive returns, while we avoided major meltdowns in stocks such as Intel. In Healthcare, Boston Scientific, AstraZeneca and Elevance were all in the green, as were Lilly and Novo Nordisk, although, for once, they were not the engine of Healthcare returns.

Source of all performance data: HANetf / Bloomberg as of 30.04.2024. 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.

You can never have too much power

Those of a certain age may remember 1992’s Batman Returns. Bruce Wayne and Maximillian Shreck are discussing power plants and Bruce says, “Max, Gotham City has a power surplus.” Max replies, “Power surplus? Bruce, shame on you. No such thing. One can never have too much power. If my life has a meaning, that’s the meaning.” We cannot know whether Mr. Shreck later invested in AI, but he was right about power, at least of the electric variety.

The results announcements from Facebook, Amazon, Microsoft and Alphabet were stunning in their capital expenditure aspirations. In Q1 the companies spent respectively $7 bn, $14 bn, $14 bn and $12 bn, while all indicated the pace would be maintained or accelerate over the year. Add only these four together and you’re looking at $200 bn in 2024 capex. For refence, Nvidia’s FY’24 revenue was $60 bn. Most of the capex will be devoted to AI data centers, which require chips and electricity to power the chips. Both are in short supply. We believe the electricity shortage to be a multi-year phenomenon that will create investment opportunities along the entire electricity generation value chain, and we are working to identify the companies best positioned to benefit.

Shariah Active ETF Performance Table

As of 31.03.2024

Saturna Al-Kawthar Global Focused Equity UCITS ETF-2.75%3.31%21.32%5.21%16.84%-3.96%9.99%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2024. 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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