Shariah ETF Monthly Report | November

Shariah ETFKey Takeaways | November

Autumnal market weakness continued in October as concerns over inflation rates and recession were supplanted by Middle Eastern conflict and fears of escalation. We have no insight into the potential resolution or whether other countries will become involved. If the oil price offers guidance its decline over the back half of October provides hope the conflict will be contained.

Japan has become of interest as market authorities ramp their plans to call out companies demonstrating poor capital allocation low returns on invested capital and depressed valuation ratios. We have no doubt that tremendous untapped value exists among Japanese publicly traded companies but are uncertain the efforts of the stock exchange will be a catalyst. In yen the return of Japan’s Topix Index has been attractive at 9.2% annualized from Nov. 1 2013 through Nov 1 2023. For those outside Japan the returns have been less impressive with the yen depreciating 53% from 98.67 against the USD ten years ago to 150.96 at the start of November. Perhaps the unwinding of Yield Curve Control will bring together two positive developments for Japanese equities.

In October theShariah ETFreturned -2.65% outperforming conventional and Islamic global benchmarks as the Energy sector reversed the previous month’s strength. Most sectors were negative although Consumer Staples registered a positive return on good performance from Proctor & Gamble and L’Oreal. On the Consumer Discretionary side Lululemon performed well. Within Healthcare most stocks declined although Eli Lilly and Novo Nordisk continued their excellent YTD performance courtesy of their GLP-1 diabetes and weight loss drugs. Information Technology was also down but we did experience positive returns with Microsoft Adobe and ServiceNow. Industrials and Materials featured the most uniformly poor performance which is somewhat perplexing given economic strength.

Source of all performance data: HANetf / Bloomberg as of 31.10.2023. 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.


The Indefatigable US Consumer

The advance release of third quarter US GDP growth of 4.9% seems incomprehensible given last year’s consensus view that recession was imminent in 2024. Multiple segments of the economy contributed to growth including consumers the government private corporate inventory build and exports. While stunning the number had been well telegraphed by the Atlanta Federal Reserve’s GDPNow running estimate of anticipated growth and did not produce any dramatic reaction. Even the Federal Reserve took the report in stride deciding against an interest rate hike at its early November meeting. Expansion of the degree reported carries momentum and the risks of a Q4 downturn are minimal. The current GDPNow forecast however anticipates a marked slowing with the Q4 estimate standing at 1.2%. Will 2024 bring the long-delayed interest rate hike-generated recession or will we encounter the oft-discussed rarely sighted soft landing? Even with perfect foresight we would change little if anything in our portfolio regardless of the economic path. We work to identify the best investments over the long-term rather than attempting to tactically time sector rotation or early cycle versus late cycle stocks.

Shariah ETFPerformance Table
As of 31.10.2023

1M

3M

6M

YTD

12M

2Y

3Y

SI

Saturna Al-Kawthar Global Focused Equity UCITS ETF

-2.65%

-8.61%

-3.69%

6.50%

10.11%

-18.45%

-4.62%

-9.34%

Please note that all performance figures are showing net data.Source: Bloomberg / HANetf. Data as of 31/10/2023. 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 &lsquoRisk 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.