The Impact of Screening and Free Float Regulations Under the Foreign Shariah Securities List on Investors in Indonesia’s Islamic Capital Market

Abstract

The rapid growth of Islamic mutual funds investing in foreign Shariah securities in Indonesia, which reached 37 products as of July 2026, 35 of which are denominated in US dollars, has not been matched by a uniform screening standard. This study analyzes the impact of Shariah screening regulation under the Foreign Shariah Securities List (DESLN) regime established by OJK Regulation No. 8 of 2025, together with the free float regulation of the Indonesia Stock Exchange (Rule No. I-A, as amended in 2026), on investors in the Islamic capital market. Employing a normative-juridical method with statutory, comparative, and conceptual approaches, supported by secondary data drawn from OJK statistics, index methodology documents, and fund fact sheets, the study finds that: (1) the DESLN regime prescribes only the types of screening criteria without numerical thresholds, thereby exposing investors to heterogeneous standards, with debt ratio ceilings of 30%, 33%, 33.33%, and 45% measured against different denominators; (2) the DESLN regime contains no free float or liquidity requirements, creating an asymmetry of protection relative to domestic shares; and (3) Shariah screening produces sectoral concentration, as reflected in a technology sector weight of 51.11% in the FTSE IdealRatings All-World Islamic Index compared with 33.40% in its parent index. The study proposes equivalence-based harmonization and a free float gate to strengthen investor protection in line with hifz al-mal and the prohibitions of najsy and gharar.