Methodology Document of CSE All Shariah Index

Transcription

1 Methodology Document of CSE All Shariah Index Contact Chittagong Stock Exchange Limited Tel: Address: Building, 1080, Sk. Mujib Road Agrabad, Chittagong, Bangladesh

2 Contents Introduction:... 3 Index Construction & Review Methodology:... 3 Index Maintenance:... 4 Appendix:... 6 Disclaimers:

3 CSE All Shariah Index Introduction: The CSE All Shariah index is developed by India Index Services and Products Ltd. (IISL), a group company of the National Stock Exchange of India Limited and a subsidiary of NSE Strategic Investment Corporation Limited. The IISL was setup in May 1998 to provide a variety of indices and index related services and products for the Indian capital markets. The CSE All Shariah index can be used by investors to track performance of shariah compliant securities that form part of all listed companies on the Chittagong Stock Exchange (CSE). Globally, product on shariah indices are available and increasing interest is seen in investing in such products by investors. Taqwaa Advisory and Shariah Investment Solutions (TASIS) has devised Shariah framework for Bangladesh market by analyzing data for five years and selected shariah compliant security year-onyear basis. All CSE listed stocks are reviewed for shariah compliance on an annual basis for past years. The index shall be reviewed on annual basis with six months data ending June each year. Constituents that become non-shariah compliance shall be excluded from the index. The index shall have variable number of constituents. Market Representation. The CSE All Shariah stocks represent about 48.60% of the total market capitalization and around 41.35% of float-adjusted market capitalization of the CSE listed companies. The CSE All Shariah index covers 17 sectors of the economy. Index Construction & Review Methodology: The index is calculated using free float market capitalization methodology and has a base date of July 04, 2010 indexed to a base value of Eligible Universe Eligible universe is all CSE listed shariah compliant companies other than Mutual Funds and Corporate bonds. The index is a based on free float adjusted market capitalization. (Prior to Jan-12, instead of float adjusted market capitalization, total market capitalization is considered.) Selection of Base Composition: Shariah compliant companies that from part of the eligible universe are selected for index inclusion. 3

4 Index Construction The CSE All Shariah Index is computed using a float-adjusted, market capitalization weighted methodology*, wherein the level of the index reflects the total market value of all the stocks in the index relative to a particular base period. The methodology also takes into account constituent changes in the index and corporate actions such as stock splits, rights issuance, etc., without affecting the index value. * Prior January 2012, the CSE All Shariah index was computed using total market capitalization method Index Maintenance: Rebalancing Index maintenance plays a crucial role in ensuring the stability of the index, as well as in meeting its objective of being a consistent benchmark of the Bangladesh equity markets. Changes in the index level reflect changes in the market capitalization of the index which are caused by stock price movements in the market. They do not reflect changes in the market capitalization of the index, or of the individual stocks, that are caused by corporate actions such as dividend payments, stock splits, mergers, or acquisitions etc. When a stock undergoes inclusion and/or exclusion in the index, the index divisor is adjusted so the change in index market value that results from the addition and deletion does not change the index level. Review of index composition Index composition is reviewed on an annual basis. Data for year ending June each year is considered for review. The shariah compliant security shall be compulsorily included in the index. Compulsory Exclusions The index constituent will be compulsorily excluded from the index if it is Constituent becomes non-shariah compliant OR Delisted Corporate Actions Adjustments Maintaining the index includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to restructurings or spin-offs. Some corporate actions, such as stock splits and stock dividends, require simple changes in the common shares outstanding and the stock prices of the companies in the index. Other corporate actions, such as share issuances, change the market value of an index and require a divisor adjustment to prevent the value of the index from changing. 4

5 Adjusting the divisor for a change in market value leaves the value of the index unaffected by the corporate action. This helps keep the value of the index accurate as a barometer of stock market performance and ensures that the movement of the index is not impacted because of these actions. The divisor adjustments are made after the close of trading and after the calculation of the closing value of the index. Corporate actions such as splits, stock dividends, spin-offs, rights offerings, and share changes are applied on the day when stock traded on ex-entitlement basis. 5

6 Appendix: Price Index Calculations Formula: CSE All Shariah is computed using market capitalisation weighted method wherein the level of the Index reflects the total market value of all the stocks in the Index relative to the base period July 02, The total market cap of a company or the market capitalisation is the product of market price and the total number of outstanding shares of the company. Market Capitalization Free Float Market Capitalization = Equity Capital * Price = Equity Capital * Price * IWF Index Value = Current Market Value / Base Market Capital * Base Index Value (1000) Base market capital of the Index is the aggregate market capitalisation of each scrip in the Index during the base period. The market cap during the base period is equated to an Index value of 1000 known as the base Index value. Disclaimers: All information contained herewith is provided for reference purpose only. CSE ensures accuracy and reliability of the above information to the best of its endeavours. However, CSE makes no warranty or representation as to the accuracy, completeness or reliability of any of the information contained herein and disclaim any and all liability whatsoever to any person for any damage or loss of any nature arising from or as a result of reliance on any of the information provided herein. The information contained in this document is not intended to provide any professional advice. The CSE All Shariah Index is not sponsored, endorsed, sold or promoted by India Index Services & Products Limited (IISL). The CSE All Shariah Index has been developed by IISL as per the specifications and requirements of CSE. IISL does not make any representation or warranty, express or implied regarding the advisability of investing in the products linked to the CSE All Shariah Index and availing the services generally or particularly or the ability of the CSE All Shariah Index to track general stock market performance in Bangladesh. 6