Afrinvest Plans Index-Traded Fund

Leading investment portfolio manager, Afrinvest (W.A) Limited is getting set to
float the first index traded fund in the nation’s capital market, the company’s
Managing Director/Chief Executive Officer, Mr. Ike Chioke , has said .

An index fund is a mutual fund or exchange-traded fund that aims to replicate
the movements of an index of a specific financial market. While the Nigerian
Stock Exchange (NSE) has been encouraging the introduction of index
funds in the
market,   but the lull in the market since 2008 and apparently low
awareness has
not allowed this to come into reality.

However, Chioke said that Afrinvest was preparing to set the pace in this
regard. According to him, preparatory to the eventual introduction of the index
fund, Afrinvest in collaboration of with BusinessDay  newspaper has  formulated
a stock market index comprising to 30 equities in the market.

Called BusinessDay Afrinvest (BA)-30 Index, Chioke explained that it would
assist   investors  in monitoring and trading of highly liquid and profitable
stocks on the Exchange.

He added that investors can as well through  the BA30 Index can  monitor their
investment portfolio 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.

“The Afrinvest-BusinessDay 30 Index helps to clear the bulkiness blocking
investors view to enable them monitor the market well,” Chioke said.

Explaining the selection further, Head of Research at Afrinvest, Mr. Victor
Ndukauba,  said   the index provides  information on the performance of the top
30 stocks based on their capitalisation and trading liquidity on a daily basis.

He noted that BA 30 Index was a market capitalisation weighted index
that tracks
the performance of 30 selected stocks quoted on Exchange.

Listing the criteria used for the selection of the stocks in the
index, Ndukauba
said they included quotation of the  company on the NSE, market capitalisation
as measured by market price multiplied by the number of shares outstanding and
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 capitalization of the constituent stocks. The
selection procedure involves ranking all quoted stocks based on market
capitalization of the constituent stocks. The selection procedure involves
ranking all quoted stocks based on market capitalization, followed by trading
liquidity. The top 30 stocks based on these criteria are then selected,”
Ndukauba said.

Source : Thisday