Market News

Zamara launches NSE equity index

Zamara chief executive Sundeep Raichura. FILE PHOTO | NMG 

Zamara, a pension fund administrator, has launched an equity index that will track listed stocks at the Nairobi Securities Exchange (NSE), enabling players to conduct a better analysis of their performance.

The Zamara Equity Index is a total return index that takes into account both the price changes and dividend income of the constituent stocks. It was developed in partnership with S&P Dow Jones — the world’s largest provider of financial market indices.

Zamara chief executive Sundeep Raichura on Wednesday said the index would address the issue of availability of shares or liquidity.

Only shares with a free float of more than Sh5 billion will be included in the index calculation, he said.

“The launch of the Zamara Equity Index is an example of an excellent partnership, bringing together Zamara with the NSE as the data provider and S&P Dow Jones who will be calculating this index for us independently,” he said.

The index will also address the issue of thin trading or ability to trade, in that only stocks with an average daily value traded over the last six months of more than Sh5 million will be included in the index.

Mr Raichura said no stock in the index would exceed 20 per cent of total market capitalisation, thus precluding the concentration risk of one stock.

The case in point is Safaricom which is hovering around 45 per cent and 50 per cent of market capitalisation.

“If we want asset managers to track an index, we cannot have them track an index in which Safaricom is at 50 per cent because that will be a big risk. So, this index actually caps risks exposure to any one stock at 20 per cent,” he said.

NSE chief executive Geoffrey Odundo said the index would improve the quality of investment monitoring in the industry and enable industry players to conduct meaningful analysis on performance.

“Investors need the indices to be used as performance indicators of the broad market and for an indication of the market direction and investors’ sentiment on the corporate sector and economy,” he said.