Re-Action of Market to Sharia Compliant Index (KMI-30) : An Opinion Survey of Accounting & Finance Executives

Islamic banking has shown tremendous growth in the first decade of 21st century. By the end of 2011, global volume of assets under Islamic finance has reached to US$ 1,289 billion. In Pakistan, Islamic banking has displayed a tremendous annual average growth of 76% during the last seven years and accounts for more than 7% of the market share (SBP-2011). One of the major constraints faced by Islamic banking in local market is the liquidity management through investing in marketable securities. As per Islamic banking regulations Sharia compliance of underlying security is prerequisite to qualify for investment by an Islamic bank. This led to the screening of equity securities through Sharia compliance filtering criteria. This study documents the perception of key players in industry about Sharia compliant equities, to highlight the market reaction about KSE-Meezan Index (KMI-30). Survey results suggest that although a majority of respondents correctly perceive the theoretical framework of Islamic Index, however participation in the process is very low (less than 30%)