Monthly Global Equity Active Shariah Screened ETF Report | February 2024

Shariah ETF Key Takeaways

Global stock markets rose in January with the US S&P500 Index and the European Stoxx Europe 600 both returning in the neighborhood of 1.5% in their respective currencies. In the US the S&P500 outpaced NASDAQ, which returned a bit over 1%. Globally, Japan provided the bright spot, returning nearly 8% in JPY, although the yen did weaken against the euro and dollar. Bucking the trend were emerging markets with representative indices down mid-single digits. That performance can largely be laid at China’s doorstep with the Shenzhen Index dropping by well over 10% and Shanghai just shy of a 10% decline.

Economic news has been positive in terms of growth and inflation, with the US leading the way and giving rise to rate cut speculation. Federal Reserve chair Powell remains, as ever, cautious and data driven. Futures markets expectations for six rate cuts this year were dashed by Powell’s comment that he expected three. Of continuing concern is commercial property following New York Community Bancorp’s share price collapse due to a loss on the back of higher loan write-offs related to property lending.

In January the Shariah ETF started the New Year on a positive note by gaining 1.84%, significantly ahead of conventional and Islamic global benchmarks, which were up slightly to down. Relative returns were boosted by our pharmaceutical holdings and our not being invested in Tesla. The absence of energy and materials combined accounted for roughly 1/3rd of the relative outperformance. Technology holds the largest position in the fund and contributed in line with the market. ASML, Merck and Nintendo led returns, while Lululemon, which soared in Q4, gave back some of its gains.

Source of all performance data: HANetf / Bloomberg as of 31.01.2024. 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.

2024 Outlook

One of our hopes for 2024 has been a broadening of stock market returns beyond the US mega-cap Magnificent 7 and the GLP-1 diabetes & weight loss duo of Eli Lilly and Novo Nordisk, although the ETF does have holdings in several of the tech giants and both drug companies.

With the launch of earnings season in late January, results have been mixed. Alphabet, Apple, Microsoft and Tesla all fell on their results, while Amazon rose a solid 8% and Facebook rocketed 20% higher on a large buyback and the initiation of a dividend. We hold neither of the latter three stocks since we find Tesla speculative and suffering from poor governance, while Amazon’s ownership of Whole Foods makes it a purveyor of haram, or prohibited, items, such as pork and alcohol. Facebook fails on its detrimental social effects and poor governance. Nvidia, arguably the company that set off the AI frenzy with last May’s earnings report, won’t release earnings until February 21st. Judging from the capex figures from Microsoft, Alphabet and Facebook, the numbers are unlikely to disappoint.

Meanwhile, in the pharmaceutical arena, Lilly and Novo have gone from strength to strength, with stocks popping higher on their respective results. We believe the two have a clear runway to sustain growth through the remainder of the decade. Despite the mixed returns from these large caps and positive economic news, we have yet to experience a real broadening of returns, as illustrated by the equal-weight S&P500 slipping -0.8% in January.

Shariah ETF Performance Table                                                                                                                
As of 31.01.2024

 1M3M6MYTD12M2Y3YSI
Saturna Al-Kawthar Global Focused Equity UCITS ETF1.84%17.44%7.32%1.84%18.92%8.16%-0.95%6.47%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/01/2024. 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.