Asean stock markets are preparing to introduce a new Islamic index to help attract capital flows from Middle Eastern countries.

Patareeya Benjapolchai, the president of the Stock Exchange of Thailand, said a recent meeting of Asean stock market executives had agreed to co-operate to set up the index.

Constituents of the index would include stocks of companies that operated in accordance with Islamic law in six countries: Thailand, Singapore, Malaysia, the Philippines, Indonesia and Vietnam.

Mrs Patareeya said the SET was already studying ways to establish an Islamic index for Thai listed companies as a guide for Islamic investors.

Expanding the concept to include all Asean markets would further promote the region's investment opportunities for overseas investors, she said.

In 2005, regional markets joined together to launch the FTSE/Asean 40 index, based on the top stocks in terms of market capitalisation.

But the index, which is registered in Singapore, has attracted relatively little interest from investors.

"We think the Islamic index concept is very interesting, and has the potential of drawing considerable capital, particularly from Middle Eastern investors," Mrs Patareeya said.

"We will hold discussions with institutional investors first, to determine the best structure. One idea, for instance, would be to set up an Islamic index with a focus on high-yield companies."

Asean market authorities plan to hold further talks on the idea at their next meeting, scheduled to be held in Bangkok in November.