DSE, CSE launch new indices Monday to boost marketAhmed Shawki and HM Murtuza
The country’s two bourses will launch new indices on Monday under free-float system scrapping the existing indices in a bid to restructure the ailing capital market.
The Dhaka Stock Exchange will launch two new indices — DSEX, which will replace the existing key index of the bourse DGEN, and DS 30, which will include shares of the top 30 companies.
DSE officials said the base year for both indices was 2008 and the base point was 1,000.
With the introduction of the new indices, the value of DSEX would be around 4,005 points on Monday while the value of DS30 would be around 1,350 points, said the officials.
The DSE will also run the previous key index DGEN to allow the investors some time to get used to the new ones. The DGEN closed at 4167.69 points on Thursday.
An index based on the free-float method is calculated by multiplying the price of an issue by the number of shares available for trading on the market. However, locked-in shares are excluded from the calculation.
In the new DSE indices more than 5 per cent shareholding by listed companies’ sponsors-directors, government’s shareholding, strategic shareholding and cross holding by associated companies would be excluded from the calculations under the free-float system.
The investors and market stakeholders are waiting for the new index with mixed anticipation as some fear the value of the new index would be way lower than the existing one and some are hopeful the new index would boost the ailing market with a higher index.
The DS 30 will feature the premier companies of the bourse that are selected with a number of criteria taken into consideration, including having a minimum net profitability record for 12 straight months.
The DS30 index companies must have a minimum daily turnover of Tk 50 lakh for three consecutive months while the performances of the companies would be reviewed every six months. The DS30 also must have representation of every sector of the bourse and no single sector can have more than five companies in the index.
The DS30 criteria also said the banks, financial institutions and insurance companies cannot have more than 10 representatives in the index.
The DSE also made a 3-month trial period mandatory for any new company that would be listed to the bourse before its incorporation in the DSEX.
The value of DSEX was computed under the performance of the DGEN since 2008 and the companies listed with it.
The DSE new indices were formulated with the assistance of S&P, an American financial service provider, which formulated a number of major stock market indices across the world, including Dow Jones Industrial Average and S&P 500.
The flawed computation of the index first came to light following the debut of Grameenphone on the stock market in November 2009 when the DSE general index gained more than 700 points in a single day.
A Securities and Exchange Commission committee in 2010 proposed that the DSE should introduce free-floating index to get over the flaws in the calculation process.
The Chittagong Stock Exchange is also set to launch its existing indices under free float method on Monday.
The CSE officials said it would continue with the existing indices CXEX, CSE30 and CSPI, but would transform the index calculation process into free float system.
Both the bourses published the name of 30 companies on Thursday which would be included in their new indices of Top-30 shares.
The CSE selected the top 30 companies whose paid-up capital is 29 per cent of the total paid-up capital of the market and the market capitalisation is 30 per cent of the total market capitalisation.
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