The Nigerian Stock Exchange has announced its readiness to review the composition of its five-sector indices in the equities market.

The indices are NSE Banking, NSE Consumer Goods, NSE Oil & Gas, NSE Industrial and NSE Insurance.

A statement by the Exchange on Tuesday noted that the composition of the indices after the review would be effective from July 1, 2013.

It added that the review would witness the entry of some major companies and the exit of others.

The statement listed incoming companies to the NSE-30 Index as Oando Plc, Okomu Oil Palm Plc, Sterling Bank Plc, Chemical and Allied Products Plc and Presco Plc, while the likely exiting stocks from the index are Total Nigeria Plc, Dangote Flour Mills Plc, Mobil Oil Nigeria Plc, Ashaka Cement Plc and GlaxoSmithkline Consumer Nigeria Plc.

For the NSE-50 Index, Livestock Feeds Plc, Aiico Insurance Plc, WAPIC Insurance Plc, Eterna Plc and Northern Nigeria Flour Mills Plc are likely incoming companies; while Custodian and Allied Insurance Plc, Nigerian Aviation Handling Company Plc, Continental Reinsurance Plc and Cement Company of Northern Nigeria Plc are likely to exit the index.

Vitafoam Nigeria Plc, Northern Nigeria Flour Mills Plc and Honeywell Flour Mills Plc are likely to be replaced on the NSE Consumers Goods Index with UTC Nigeria Plc, Multi-Trex Integrated Foods Plc and Nigerian Enamelware Plc.

The statement noted that in the NSE Banking Index, Sterling Bank Plc, Unity Bank Plc and Wema Bank Plc might replace Skye Bank Plc, Fidelity Bank Plc and Diamond Bank Plc.

It added that for the NSE Oil/Gas Index, Japaul Oil & Maritme Services Plc could be replaced with Eterna Plc and Beco Petroleum Plc.

The statement said, “As the Index Committee explained, the NSE-30, NSE-50 and NSE Industrial Indices are modified market capitalisation index with the numbers of included stocks fixed at 30, 50 and 10, respectively. The numbers of included stocks in the NSE-Consumer Goods, Banking, Insurance and Oil/Gas Indices are 15, 10, 15 and 7 respectively.

“The stocks will be picked based on their market capitalisation from the most liquid sectors. The liquidity is based on the number of times the stock is traded during the preceding two quarters. To be included, the stock must be traded for at least 70 per cent of the number of times the market opened for business.”

The committee further stated that the exchange was not oblivious of the fact that the number of the stocks that will be included in some of the indices might be inappropriate for optimal portfolio diversification, adding that the numbers would be reviewed as the sector conditions changed.

Source: Punch (by Udeme Ekwere)