News about the sovereign debt challenges confronting the U. S. and the Eurozone were clearly the main topics of global finance in July and, not surprisingly, it weighed on both the conventional Dow Jones indexes as well as the composites of the Dow Jones Islamic Market (DJIM) Indexes.
The generally unsettled economic climate throughout the month led to an overall drop in industry output, as evidenced by the DJIM Industrial Index which slid 4.56% – July’s worst performer among the DJIM sector indexes. Despite the global economic gloom, it appeared as if people in the DJIM universe did not stop phoning, e-mailing and texting: the DJIM Telecommunications Index, up 2.05%, was July’s best-performing DJIM sector index.
As for country-specific indexes, the DJIM Turkey Index posted July’s largest loss, down 5.35%, no doubt exacerbated by the late-month resignation of four of the nation’s top military officials. The DJIM Thailand Index gained 13.15%, the most of any country-specific index in the DJIM universe, as investors were cheered by the nation’s July 3 general elections which ended an almost four-year long political stalemate. The DJIM Thailand Index is also the top DJIM country performer on year-to-date basis, finishing up 15.37% through the end of July.
The DJIM U.S. Titans 50 Index, which measures the performance of 50 Islamic halal U.S. blue chips, closed down 1.04% for July, while the conventional bellwether, the Dow Jones Industrial Average, ended the month lower by 2.18%. Meanwhile, the flight of capital into “safe havens” such as gold and the Swiss franc intensified.
In the Middle East and North Africa (MENA), civil unrest continued in Libya, Syria, Bahrain and Yemen, leading investors to sell shares. MENA indexes were among the month’s worst performers: the DJIM GCC (Gulf Co-operation Council) Index fell 2.88% despite U.S. crude oil prices stabilizing around $100 per barrel. The DJIM Kuwait Index plummeted 3.52%. The GCC and Kuwait indexes are among DJIM’s worst year-to-date performers.
The specter of a downgrade of the U.S.’s credit rating, triggered investor angst around the world throughout the month of July. Even the CEO of one of the world’s largest re-insurers, Nikolaus von Bomhard of Munich Re, recently expressed his concern, telling a German newspaper earlier this week that a conventional state bond is “no longer what it used to be – a safe investment in all respects.” Nevertheless, Islamic finance’s conventional bonds — known as Sukuk – saw gains in July as the Dow Jones Citigroup Sukuk Index rose 1.18%, a result that was higher than most Dow Jones composite indexes.