Four companies have replaced an equal number of constituents in the Karachi Stock Exchange (KSE) Meezan-30 Index (KMI-30) after the KSE management re-composed Pakistan’s one of the two indices of Shariah-compliant stocks.

According to a notice sent to the KSE, the four new constituents of the KMI-30 are DG Khan Cement, Nishat Mills, Millat Tractors and Treet Corporation. The outgoing four companies are Pakistan State Oil, Pakcem Limited, Kot Addu Power and Kohat Cement.

Out of the KSE-100 Index, KSE All-Share Index, KSE-30 Index, KMI-30, All Shares Islamic Index, BK TI and OG TI, only KMI-30 and All Shares Islamic Index track the performance of Shariah-compliant stocks based on the free-float market capitalisation methodology.

The All Shares Islamic Index was launched last month that gauges the performance of 225 companies, which constitute the whole spectrum of shares that meet the Shariah-screening criteria.

The KSE management has carried out the re-composition exercise based on the review period of January 1 to June 30. The index is revised on a semi-annual basis.

The screened list of Shariah-compliant securities is provided by Al Meezan Investment Management Limited, an asset management company, whose research analysts review each company’s financial reports frequently to ensure that they meet all the relevant benchmarks.

For any stock to be Shariah-compliant, it must meet six broad criteria. First and foremost, the core business of the company should not violate any principles of Shariah. Also, interest-bearing debt in relation to total assets of a company must be less than 37% for it to be called Shariah-compliant.


Non-compliant investments in relation to total assets must be less than 33% for a company to be categorised as Shariah-compliant. Similarly, its non-complaint income in relation to total revenue must be less than 5%, illiquid assets in relation to total assets must be greater than 5% and the market price per share should be equal to or greater than the net liquid assets per share for a company to become Shariah-compliant.

Published in The Express Tribune, December 25th, 2015.