Nigerian bourse to commence review of NSE 30, other sub-indices
Reporter
The Nigerian Stock Exchange ( NSE) will soon commence the review of the NSE 30 and the six sectoral indices of the exchange.
The information, which was passed through an email sent to businessamlive.com Wednesday by the exchange stated that these indices are normally reviewed bi-annually (June and December) except for NSE Pension index that is reviewed once in the year (December).
With the review, the Nigerian stock market will witness the entry/re-entry as well as exit of some major companies. The composition of these indices, according to the email, will be effective on July 1, 2017 after the review
The NSE-30 and NSE Industrial Indices are modified market capitalization index with the numbers of included stocks fixed at 30 and 10, respectively.
Stocks are selected based on their market capitalization from the most liquid sectors. The liquidity is based on the number of times the stock is traded during the preceding two quarters. To be included, the stock must have traded for at least70 percent of the number of times the market opened for business.
The statement further stated that the exchange is aware that the number of the stocks included in some of the indices may not be practically suitable for optimal portfolio diversification; however, the numbers would be reviewed as sector conditions change.
The Nigerian bourse began publishing the NSE 30 Index in February 2009 with index value available from January 1, 2007. On July 1, 2008, NSE developed four sectoral indices and developed the NSE Pension Index in 2013, with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors.
The sectoral indices comprise the top 15 most capitalized and liquid companies in the Insurance and Consumer Goods sectors, top 10 most capitalized and liquid companies in the Banking and Industrial Goods sector and the top seven most capitalized and liquid companies in the Oil & Gas sector.
The indices, which were developed using the market capitalization methodology, are rebalanced on a biannual basis -on the first business day in January and in July.