Lombard Odier gets bullish on Islamic equities, dollar sukuks

dubai — Shariah-compliant equities and dollar-denominated sukuks offer positive growth potential to investors with key focus on the European and Emerging markets, a senior official of Swiss bank said in Dubai on Wednesday.

Christophe Lalandre, managing director, Lombard Odier, said Shariah-compliant equity indices – such as MSCI Islamic index – perform better than the conventional ones during financial crisis as was witnessed during 2008.

“We are really constructive on the equity side. We see a positive growth of MSCI World Islamic Index and our view is that European equities will do better than the US. There is a growth in the US but we feel it is more or less the end of the cycle… European equites are not as high as the US equities,” Lalandre told Khaleej Times during an interview to announce the launch of Shariah-compliant investment offerings.

“In general, Islamic index is less volatile than conventional index because it is restricted to companies that have very limited amount of debt because the Islamic invest-

in general, islamic index is less volatile than conventional index because it is restricted to companies that have very limited amount of debt

Christophe Lalandre, managing director, Lombard Odier

ment rejects companies making heavy use of debt in their activities and speculative investments etc. Islamic index underperforms when you have less weightage of financial sector and more exposure to energy sector when oil prices go down. When there is a weakness in energy sector, the Islamic equity index underperforms conventional,” he said.

The Swiss bank had $280 billion assets under management by the end of 2017, Lalandre said, adding that the company has hundreds of millions of dollar worth of Islamic assets under management. The bank has been offering Shariah-compliant products since 2012. Lalandre finds US dollar denominated sukuks more attractive than Islamic bonds issued in other currencies.

“When interest rates are low, as we have been experiencing over the last few yeas, sukuks are giving less returns than conventional bonds because it is more expensive to create sukuks. In the days of low interest rates, you have liquidity but not much investments to do. When interest rates are increasing, then we feel that it will be easier to issue new sukuks.

“Sukuks suffered in the last 3 months. So, we have good opportunities to enter into US dollar sukuks. That is what we are focusing on at the moment. We could invest in dollar sukuks listed on Nasdaq Dubai,” he said during a media briefing in Dubai on Wednesday.

— waheedabbas@khaleejtimes.com