NSE reviews stock indices

The Nigerian Stock Exchange will by the end of 2013 reviews its stock indices, effective from January 1, 2014, creating means for new entry, existing of some major companies

The reviewed indices include NSE 30, NSE 50 and the five sectoral Indices of The Exchange - the NSE Banking, the NSE Consumer Goods, the NSE Oil & Gas, NSE Industrial and the NSE Insurance.

The likely incoming stocks into the NSE-30 index are Transcorp, Forte Oil, Conoil and Wema Bank while Ashaka cement, Dangote Flour mills, Skyebank and total Nigeria are likely outing stocks.

IHS Nigeria, MRS Oil Nigeria, Wapic Insurance and AIICO Insurance are likely ingoing companies in the NSE-50 Index. Likely outgoing companies in the NSE-50 include Livestock feeds, NAHCO, Custodian &Allied Insurance and Continental Reinsurance.

As the Index Committee explained, the NSE-30, NSE-50 and NSE Industrial Indices are modified market capitalization index with the numbers of included stocks fixed at 30, 50 and 10, respectively.

The numbers of included stocks in the NSE-Consumer Goods, Banking, Insurance and Oil/Gas Indices are 15,10, 15 and seven, respectively.

The Stocks will be picked 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 be traded for at least 70 percent of the number of times the market opened for business.

The Committee further stated that the exchange was not oblivious of the fact that the number of the stocks that will be included in some of the indices may be inappropriate 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 values available from January 1, 2007. On July 1, 2008, the NSE developed four sectoral indices and one 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 fifteen most capitalized and liquid companies in the Insurance and Consumer Goods sectors, top ten 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.