Investors will track blue chip firms better after NSE shakes up

Investors of blue chip counters at the Nairobi Securities Exchange (NSE) will be able to track and monitor the performance of their investments better after the bourse launched two new market indices.

The NSE said yesterday the two indices - the NSE 10 Share Index (N10) and the NSE Bond Index (NSE-BI) - will track the performance of the equities market and bonds market respectively.

The N10 Index shall be based on a set of 10 companies: Safaricom, Equity Group Holdings, KCB Group, Co-operative Bank of Kenya, Absa Bank Kenya, East African Breweries, NCBA Group, Kenya Electricity Generating Company, Kenya Re Insurance Corporation, and Centum Investment. 

The constituent companies list will be reviewed semi-annually and one of the key elements of this index is that it will be based on market capitalisation float adjusted methodology that will be distributed on a daily basis, said the NSE. 

Free-float market capitalisation is defined as that proportion of total shares issued by the company that are readily available for trading in the market. 

It generally excludes promoters’ holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course.

In other words, free-float market capitalisation is the proportion of total shares available for trading to the general public.

This model has in recent years been adopted by all the major financial indices of the world.

Monitor performance

“The development of the new equity index, that will adopt a market capitalisation float adjusted methodology and the new bond index, will enhance our investors’ ability to effectively monitor the performance of listed securities on the NSE,” said NSE Chief Executive Geoffrey Odundo.

The performance of this index will be part of the end of day reports effective today, said the NSE.

On the other hand, the NSE-BI will be a weekly index that will be distributed together with the NSE Yield curve. 

“The index will be based on the benchmark government bonds listed on the Nairobi Securities Exchange,” said NSE.

It is expected that this index will form part of a fixed rate future contracts that will be issued on the NSE derivatives market.

The index will be available to the market with effect from October, 1 2023. 

At the same time the NSE said it has reviewed the current NSE 20 Share index, replacing WPP Scan Group, Nairobi Securities Exchange, and Diamond Trust Bank Kenya with CIC Insurance Group, Bank of Kigali Group and I&M Holdings respectively, on the list of constituent companies.

The bourse opened the week with a total of 4.8 million shares valued at Sh128 million, against 187.5 million shares valued at Sh1.1 billion posted on Friday.

The banking sector led the way with shares worth Sh61.5 million transacted, which accounted for 47.94 per cent of the day’s traded value. Equity Group Holdings moved 600,000 shares worth Sh22.8 million and closed at Sh38.10.