Buying and Selling Shares Based on Market Speculation; Conditions of Buying and Selling Shares

Question:

As salaamu ’alaykum,

Is it permissible to buy and sell shares based on market speculation? What are the conditions for buying and selling shares?

Answer:

بسم الله الرحمن الرحيم

الجواب حامدا ومصليا ومسلما

Wa ‘alaykum as salaam wa rahmatullahi wa barakaatuh,

Scholars have differing views about buying and selling shares. While some have concerns about the legitimacy of buying and selling company shares, there are others that consider buying and selling of shares to be permissible if the following conditions are fulfilled:

1) The business that the company is primarily engaged in must be permissible. For example a company selling intoxicants would be considered an impermissible business according to the Shari’ah.

2) The company must have or deal in fixed assets. If the company only has liquid assets then they can only be sold at par market value.

3) The investor voices disagreement of the company’s transactions that include the giving and taking of interest. Also, the investor must give the percentage of income received through interest in sadaqa.

Market speculation is not based on benefiting from the share by collecting dividends, etc, but it is based on the notion of whether or not the market value of the share will increase. In essence the person is trying to buy the shares when the prices are low and sell them when the prices rise on those shares.

Assuming that all the conditions for buying and selling shares in a particular company have been fulfilled, one may buy and sell shares based on market speculation. At the same time, one must also be mindful not to violate any other orders of shari’ah in these transactions. For example, he/she cannot sell the shares before they come into his/her possession.

والله اعلم

And Allah subhanahu wa ta'ala knows best.

Waqas Memon

Approved by Mufti Husain Ahmad Madani

 

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