The Nigerian Stock Exchange (NSE) has removed 17 companies from its market-gauging indices to ensure that the indices fully reflect the market situation and the underlying fundamentals they represent.
At the end of the annual full-year market index review, the NSE removed 17 companies from seven indices while six remained unchanged. The Exchange also added 10 companies to replace some of the exited companies. The newly reconstituted indices take effect today.
The reviewed indices included the NSE 30 Index, NSE Lotus Islamic Index, NSE Pension Index, Corporate Governance Index, Afrinvest Bank Value Index, Afrinvest Dividend Yield Index, Meristem Growth Index, Meristem Value Index; and the five Sectoral Indices of the Exchange – NSE Banking Index, NSE Insurance Index, NSE Industrial Index, NSE Consumer Goods Index and NSE Oil & Gas Index.
The companies that were removed included Julius Berger Nigeria, Niger Insurance, MRS Oil Nigeria, PZ Cussons Nigeria, Dangote Sugar Refinery, FCMB Group, United Capital, Africa Prudential, AIICO Insurance, BUA Cement, GlaxoSmithKline Consumer Nigeria, Okomu Oil, Wema Bank, Cadbury Nigeria, Dangote Cement, Fidelity Bank and UACN Property Development Company (UPDC).
The removal and addition underscored the waning or growing influence of the stock, in the fundamental area or sector that a particular index tracks. Julius Berger Nigeria was replaced by Transnational Corporation of Nigeria in the NSE 30 Index, a value-based index that tracks the 30 largest companies, by capitalisation, on the Exchange. Niger Insurance was removed and replaced with Veritas Kapital Assurance and African Alliance Insurance in the NSE Insurance Index. Eterna replaced MRS Oil in the NSE Oil and Gas Index.
Also, four companies – BUA Cement, GlaxoSmithKline Consumer Nigeria, Okomu Oil and Wema Bank, were removed from the Meristem Growth Index. These were placed with Access Bank, Cadbury Nigeria, Guaranty Trust Bank and Julius Berger Nigeria.
In the Meristem Value Index, four companies were removed, including Cadbury Nigeria, Dangote Cement, Fidelity Bank and UACN Property Development Company (UPDC). These were replaced with Dangote Sugar Refinery and Total Nigeria.
Five companies – Dangote Sugar Refinery, FCMB Group, United Capital, Africa Prudential, AIICO Insurance were also removed from Afrinvest Dividend Yield Index, which tracks companies with highest dividend yields. PZ Cussons Nigeria was removed from the NSE Lotus Islamic Index, which tracks stocks that comply with Islamic business rules.
Meanwhile, six indices were unchanged, including NSE Consumer Goods Index, NSE Banking Index, NSE Industrial Goods Index, NSE Pension Index, NSE Corporate Governance Index and Afrinvest Bank Value Index.
The NSE stated that the indices were developed to allow investors to follow market movements and properly manage investment portfolios.
“Designed using the market capitalisation methodology, the indices are rebalanced on a semi-annual basis on the first business day in January and in July,” NSE stated.
The NSE started publishing the NSE 30 Index in February 2009 with index values available from January 1, 2007. On July 1, 2008, the NSE developed five sectoral indices 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 capitalised and liquid companies in the insurance and consumer goods sectors; the top ten most capitalised and liquid companies in the banking and industrial goods sector; and the top seven most capitalised and liquid companies in the oil and gas sector.
In July 2012, the NSE launched the NSE Lotus Islamic Index (NSE LII) which consists of companies whose business practices are in conformity with Shari’ah investment principles, with the aim of increasing the breadth of the market and creating an important benchmark for investments as the alternative ethical and noninterest investment space widened.
The companies that appear on the Islamic index have been screened by Lotus Capital Halal Investment, in accordance with a methodology approved by an internationally recognised Shari’ah Advisory Board comprising of renowned Islamic scholars.