AFRINVEST, in collaboration with the media, has formulated a 30 Index scheme aimed at helping investors, particularly, institutional investors, to trade on stocks of highly liquid companies on the Exchange.The index formulation will also serve as a veritable platform for local investors to use in plying the stock market.Investors can as well, through this basket of 30 Index, monitor their investment status from abroad as the index itself serves as a benchmark to measure the performance of stocks that fulfill the twin criteria of liquidity and capitalisation.Speaking at the launch of the index, last week, in Lagos, Ike Chioke, Managing Director, Afrinvest (West Africa) Limited, noted that it was important for investors to begin to monitor the aspect of the stock market which impacted on the performance of the market.The Afrinvest-BusinessDay 30 Index helps to clear the bulkiness blocking investors view so as to enable them monitor the market well, Chioke said.He was also of the view that the 30 Index could help to create Exchange Traded Fund (ETF), which was an investment traded fund on stock exchanges much like stocks.An ETF holds assets such as stocks, commodities or bonds, and trades close to its net asset value over the course of the trading day.It is in the spirit of ongoing reforms sweeping through Nigerias financial system, including banks and capital market, that Afrinvest and BusinessDay collectively created the BusinessDay-Afrinvest 30 Index tagged BA-30 to provide information on the performance of the top 30 stocks based on their capitalisation and trading liquidity on a daily basis.BusinessDay-Afrinvest 30 Index is a market capitalisation weighted index that tracks the performance of 30 selected stocks quoted on the Nigerian Stock Exchange (NSE).Explaining the selection criteria for the BA-30 Index, Victor Ndukauba, an analyst at Afrinvest, said the criteria included the listing of the company on the NSE, market capitalisation as measured by market price multiplied by the number of shares outstanding.Also considered in the selection of the companies in the BA-30 Index, according to Ndukauba, is the liquidity of the stocks as measured by the ratio of average daily value traded and the market capitalisation.The constituent stocks in the BA-30 are selected based on market capitalisation and liquidity. Liquidity is measured by the ratio of the naira value of trade to the market capitalisation of the constituent stocks. The selection procedure involves ranking all quoted stocks based on market capitalisation of the constituent stocks. The selection procedure involves ranking all quoted stocks based on market capitalisation, followed by trading liquidity. The top 30 stocks based on these criteria are then selected, Ndukauba told the audience at the event.The BA-30 Index is calculated using a base weighted aggregate methodology. The index employs a modified market capitalisation-weighting methodology. At each quarter, the index is rebalanced such that the maximum weight of any index security does not exceed seven per cent. The base period for the BA-30 is December 31, 2011. The base value of the index at that date is 1,000 points, he said.The constituent stocks in the BA-30 cut across different sectors of the market. These include banking, infrastructure, consumer goods, insurance and oil and gas.
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