By Nkiruka Nnorom
Unity Bank Plc, Seplat Petroleum and Sterling Bank Plc are among the stocks that have been penciled down by the Nigerian Stock Exchange, NSE, to join its NSE 30 Index as it finalizes end of year review of the Index.
The composition of the review, which is expected to take effect on January 1, 2015, will also see 7-Up Bottling Co. Plc and Mobil Oil Plc included on the Index, while Total Nig. Plc, Glaxosmithkline, Fidelity Bank, Ashaka Cement and FCMB will be removed.
On the NSE 50 Index, Seplat Petroleum, Beta Glass Co. Plc, Caverton Offshore Support Group and Ikeja Hotels will be included, while Wapic Insurance, Continental Reinsurance, MRS Oil Nig. Plc and Cement Company of Northern Nigeria, CCNN, will be removed.
Also to be reviewed are the five sectoral indices, which include NSE Consumer Goods Index, NSE Banking Index, NSE Insurance Index, NSE Oil & Gas Index and NSE Industrial Index.
The indices are developed using the market capitalization methodology and are rebalanced on a biannual basis on the first business day in January and in July.
In a statement, 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 committee added that the stocks are 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.
n 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.