Monthly Global Equity Active Shariah Screened Report | January 2024

Shariah ETF Key Takeaways

December carried on November’s market rally at a more modest, if still buoyant pace. As inflation continued to ebb and central bankers adopted less aggressive monetary outlooks, equity and fixed income/sukuk investors were joined by gold bugs and cryptocurrency enthusiasts in an across-the-board rally. Perhaps the most notable feature of equity market performance in November and December was the democratization of returns. After dominating for much of the year, the Magnificent Seven took something of a back seat to the rest of the market, best illustrated by the equal-weighted S&P500 outperforming the market capitalization weighted conventional index by nearly 300 basis points since the end of October. To be sure, investors in the Mag 7 had no reason for disappointment over the final two months as each of the stocks appreciated by double-digit percentages, while Tesla, Nvidia and Meta continued to outperform.

In December the Shariah ETF appreciated 5.72%, outperforming conventional and Islamic global benchmarks and bringing the full year 2023 return to 22.81%. Unlike 2022, the absence of conventional energy exposure did not present a headwind to relative performance versus global Islamic benchmarks, which tend to be heavily weighted in energy. Technology dominated top performers for the year with Broadcom, Service Now, Adobe, Apple, Alphabet, Intuit and Microsoft all among the top ten. The list was rounded out by apparel maker Lululemon and the diabetes/weight-loss duo of Eli Lilly and Novo-Nordisk, the latter becoming the largest European stock by market capitalization. Other notable performers included Nintendo and Murata from Japan, L’Oreal and Schneider Electric from France, Wolters Kluwer and ASML from the Netherlands and Taiwan Semiconductor. Only a handful of stocks detracted from returns in 2023. These included Johnson Controls, Elevance Health and Agilent, all from the US, along with the UK’s AstraZeneca.

Source of all performance data: HANetf / Bloomberg as of 31.12.2023. 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

After the 2020 pandemic gyrations followed by the strong 2021 market, a sharp decline in 2022 and surprising rebound last year, investors may wish for nothing more than a return to normality and more restrained index movements. We believe there’s a chance such wishes may be fulfilled and view 2023’s most significant development as having been the return to a more normalized interest rate environment. The appearance of attractive real rates of return for savers means that for the first time in several years, TINA has been slayed and there is an alternative.

Apart from a more attractive fixed income environment, investors may look to equity markets outside of the US. Years of relative US outperformance have driven valuation gaps between the US and the rest of the world to historic levels. We’ve already seen a solid rebound in Japan, while Europe may attract greater attention when investors realize that US markets don’t appear to be great value trading around 20x forward earnings with single digit anticipated earnings growth. A successful soft landing or even a mild recession that brings down rates would likely cushion any US downdraft but it’s difficult to build a case for the outsize returns we have seen in four of the past five years.

Shariah ETF Performance Table                                                                                                                
As of 31.12.2023

Saturna Al-Kawthar Global Focused Equity UCITS ETF5.72%12.26%6.16%22.81%22.81%-4.14%-4.34%4.55%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/12/2023. 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.