AfDB updates its composite index

The African Development Bank (AfDB) has updated its bond index to include two sub-indices with one capping exposure and the other excluding the bigger South African market.

AfDB said the move was intended to enhance debt market liquidity and transparency as issued in local currency.

For investors, it will limit exposure to any one major country, thus cutting associated risks. The performance of Kenyan bonds is included in the index.

“The African Development Bank announces the update of its composite index [by enriching it] with two sub-indices (BADBC and BADBX)…To improve African debt market liquidity and transparency,” the bank said.

The new (BADBC Index) is the capped version of the African Bond Index (ABABI) with a maximum exposure of 25 per cent per country while the (BADBX Index) excludes South-Africa.

“The enhancement of the composite index family will provide investors with more diversified baskets, thus reducing their exposure to one major country,” said the bank.

AfDB through the African Financial Markets Initiative (AFMI) launched its AfDB/AFMI Bloomberg African Bond Index (ABABI) in February 2015. 

Calculated by Bloomberg Indices, the composite index comprises the South Africa, Egypt, Nigeria, Kenya, Botswana and Namibia local currency sovereign indices. In April 2017 Zambia and Ghana were added to the composite index.

The AfDB-linked index is among those created in recent years to gauge the performance of the fixed-income market in frontier markets.