FE Report

The Dhaka Stock Exchange (DSE) Monday launched two new price indices -- the DSE Broad Index (DSEX) and the DSE-30 Index (DS30) -- replacing the DSE General Index (DGEN) and the DSE-20 respectively.

DSE president Rakibur Rahman inaugurated the new indices at the DSE. Senior vice-president of the bourse Ahmad Rashid, directors Md Shahjahan, Khwaja Ghulam Rasul, Md. Hanif Bhuiya and Minhaz Mannan Emon, and CFO Shuvra Kanti Choudhury, were present, among others, in the inaugural ceremony.

The new indices -- DSEX and DS30 -- have been developed and designed by Standard and Poor's (S&P), one of the world's prominent credit-rating agencies, said Rakibur Rahman at a press briefing.

"Investors' confusion will be removed, as we have introduced international-standard indices for the country's prime bourse to represent its activities more appropriately," Mr Rahman said.

Alka Banarjee, head of equity indices product management of the S&P, Dow Jones Indices, said DSEX can be considered as the benchmark general index of the bourse, as it shows the exact price movement of the listed companies.

"The companies included in DS30 will be considered as good shares to invest. We have included 30 companies in the index, considering their profitability and liquidity," he added.

DSEX, the newly-introduced broad index and composed of 199 companies, will reflect around 97 per cent of the total market capitalisation.

DS30 that include blue-chip companies will reflect around 51 per cent of the total market capitalisation.

DSEX has been fixed with base points of 2,951.91 as on January 17, 2008, which was the index value of DGEN (DSE General Index) that time, while DS30 has been formulated with base points of 1,000.

In case of DSEX, each of the eligible stocks must have a float-adjusted market capitalisation of above Tk 100 million. To exist in the DSEX a stock must have a minimum six-month average daily value traded (ADVT) of Tk 1.0 million as of rebalancing reference date.

A few months ago, the DSE appointed S&P to design the new index on the basis of free-float methodology, used in calculating the world's major indices, including the Dow Jones Industrial Average and the S&P 500.

Under the free-float methodology, market capitalisation of an index's underlying companies is calculated by multiplying the equity's price with the number of shares available for trading.

The method provides an accurate reflection of market movement, and is deemed to be a robust way of calculating market capitalisation. DSEX will be rebalanced once in a year based on year-end closing.

In case of DS30, eligible stocks must have a float-adjusted market capitalisation of above Tk 500 million as of the rebalancing date. To exist in DS30 a stock must have a minimum three-month average daily value traded of Tk 5.0 million as of rebalancing reference date.

DS30 will be reconstituted twice a year, on the basis of the companies' half-yearly trading performance.

DS30 stocks must be profitable as measured by positive net income over the last 12-month period, as of the rebalancing reference date. The figure is calculated by adding the latest four quarters of net income reported for the company.

Meanwhile, the newly-introduced DSEX gained 34.56 points or 0.85 per cent to close at 4,090.47 from its opening value of 4,055.91 points Monday. DS30 closed at 1,473.01 points, after gaining 12.70 points or 0.87 per cent from its opening value of 1,460.30 points.