The Nigerian Stock Exchange (NSE), on Tuesday announced the first bi-annual review of its blue-chip NSE-30 index, along with the seven sectoral indices, namely: Consumer Goods, Banking, Insurance, Industrial, Oil & Gas, Pension and the NSE Lotus Islamic Indices for 2017. The indices, except for NSE Pension that is reviewed only in December, are normally reviewed in June and December.
The review process saw the exit of Diamond Bank, Sterling Bank and Fidelity Bank and entry of agro-business sector operators- The Okomu Oil Palm and Presco, as well as petroleum products marketing giant- Conoil, based on their market capitalization.
While the index, which became operational on Tuesday, January 3, 2017, saw no changes in the NSE Consumer Goods and Banking Indices, Prestige Assurance, Sovereign Trust Insurance and UnityKapital Insurance replaced Equity Assurance, Linkage Assurance and Universal Assurance on the Insurance Index.
The industrial as well as oil/gas indices had no changes, just as Pension index welcomed Ecobank Transnational Incorporated, Dangote Flour Mills and United Capital to the detriment of Beta Glass Company, International Breweries and Skye Bank.
Forte Oil Plc was became the latest entrant into the NSE Lotus Islamic Index, while Lafarge WAPCO exits.
In a statement by Joseph Kadiri and Olumide Orojimi, the exchange noted that “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 capitalisation 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, a stock, the statement continued, must have traded for at least 70% of the number of times the market opened for business.
”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 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 NSE noted that 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.