KSE-100 index re-composed on sector value and market cap basis

Published: September 30, 2013

The free-float methodology takes into account only that proportion of total shares issued by a company that are readily available for trading on the exchange. PHOTO: FILE

KARACHI: The Karachi Stock Exchange (KSE) has carried out the re-composition exercise of the KSE 100-Share Index companies, which will take effect from October 1.

According to a statement posted on the KSE notice board on Monday, the benchmark index has been recomposed as per the free-float methodology based on the March-August review period.

Traditionally, the largest company in terms of market capitalisation from each of the 33 sectors, except open-ended mutual funds sector, was included in the KSE 100-Share Index, while the remaining 68 companies were selected on the basis of overall market capitalisation in descending order.

But post-October 15, 2012, the KSE-100 Index is calculated on the basis of free-float market capitalisation of companies instead of full market capitalisation. This has made the benchmark index more representative of the actual performance of the stock market, as the free-float methodology takes into account only that proportion of total shares issued by a company that are readily available for trading on the exchange.

Companies become part of the KSE 100-Share Index on the basis of either the capitalisation rule or the sector rule. This ensures that the performance of all companies with a large free-float is reflected in the benchmark index while all sectors, except one, are also adequately represented through it.

As a result of the latest reshuffling in the KSE 100-Share Index, Kohinoor Textile Mills and Kohat Cement Company have joined the index on the basis of their market capitalisation, replacing Bank Islami Pakistan and the Bank of Khyber.

On the basis of the sector rule, Century Paper and Board Mills have replaced Security Papers in the benchmark index.

The KSE notice said positions of International Steel and Nestle Pakistan, which were part of the index on the basis of the market capitalisation rule, have now been changed. They are now qualified for re-entering the index on the basis of the sector rule as a replacement for International Industries and Engro Foods, respectively.

The notice also stated that International Industries and Engro Foods have qualified for re-entering the index on the basis of the market capitalisation rule as opposed to their previous status in the index, which was based on the sector rule.

Published in The Express Tribune, October 1st, 2013.

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