Islamic Equity Monthly Report | May

09 May 2022

Key Takeaways

Inflation remains high, several economies experienced first quarter weakness, fighting continues to rage in Ukraine and no consensus exists as to the economic outlook beyond a few months.[1] By the time you read this, Putin will have given his May 9th speech and we may have a better view of how desperate his measures may become. [2]

The market recovery experienced over the second half of March reversed in April with broad market indices sinking by high single-digit percentages, although Europe held up relatively well, perhaps buoyed by Ukrainian success on the battlefield. [3]

In April the Saturna Al-Kawthar Global Focused Equity UCITS ETF fell 7.78%, broadly in line with global indices, although trailing other Islamic benchmarks that may have higher exposure to energy and lower exposure to technology.[4] During the quarter we reduced our semiconductor exposure by selling NXP Semiconductor, replacing it with AstraZeneca. The ETF’s ESG mandate may continue to be a performance drag given current energy markets, especially if Europe proceeds with an embargo on Russian oil imports.[5] Longer-term, however, we believe there is a significant risk to the stranding of fossil fuel assets, while Islamic investing is also intended to beneficial to human well-being; a description that clearly does not apply to the effects of carbon emissions on a rapidly warming planet. 

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.

Macro Outlook

While the most recent Federal Reserve meeting did not occur until early May, it’s worth commenting upon given the 50-basis point rate hike. The stock market reacted negatively in the first instance until investors came across Chairman Powell’s remarks that the Fed is not considering larger increments for future rate increases and that he expected the Fed Funds rate to be 2-3% by year-end, which is well within the range of expectations of most investors.[6] Market reaction to news that has been long anticipated can bewilder. US homebuilders, for example jumped by mid-single-digit percentages following the announcement even though mortgage rates are now the highest since the Global Financial Crisis. [7]

Going forward the Fed’s goal will most likely be to rein in inflation that has exceeded their expectations, without plunging the economy into recession. Given the low unemployment rate and generally flush financial condition among consumers due to multiple COVID-related stimulus packages, that represents a tall order and almost certainly requires cooling the job market.[8] Rising unemployment would mark a sharp departure from the recent past with repercussions throughout the economy and we do not envy the Federal Reserve its task. [1]

Elsewhere in the world, higher US rates could further strengthen the US dollar, which would have a significant impact on inflationary pressures in Japan where the Yen already trades at 20-year lows versus the USD.[9] Meanwhile, effects of war on European economies would only increase in the event of energy embargos, which implies static rates and further moves toward parity for the USD and Euro. That’s a clear positive for companies with significant dollar-based income but difficult for most everyone else. 

AMAL Performance Table (As of 30.04.2022)








Saturna Al-Kawthar Global Focused Equity UCITS ETF







Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2022. 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.      


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