The Nigerian Stock Exchange (NSE) on Tuesday announced the review of the NSE-30, and the seven sectoral indices of the Exchange.
These Indices are NSE Consumer Goods, NSE Banking, NSE Insurance, NSE Industrial, NSE Oil & Gas, NSE Pension and the NSE Lotus Islamic Indices.
The Exchange, in a statement, 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).
The review process saw the entry of some major companies and the exit of others from the various indices. The Index review will became operational today, January 3, 2017. The statement noted that there were 123 Trading Days during the review period of June 24, 2016 and December 23, 2016.
“The NSE-30 and NSE Industrial Indices are modified market capitalization index with the numbers of included stocks fixed at 30 and 10, respectively. The 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 least 70 percent of the number of times the market opened for business,” the NSE said.
“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,” it added.
The Nigerian bourse began publishing the NSE 30 Index in February 2009 with index values available from January 1, 2007. On July 1, 2008, The 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.
The compiler of the indices maintains the right to modify the circulated selection above in connection with any mergers, takeovers, suspension or resumption of trading or any other company structure changes during the period before the effective date of the annual review.