NSE introduces pension index

THE Nigeria Stock Exchange (NSE) has introduced the Pension Index, as part of its efforts to deepen the market operations. The index values, which was available as from January 2, 2013 (December 31, 2012 = 1000) was exposed to the investing public on Thursday, July 2.

The creation of the NSE Pension Index, according to the Exchange, would encourage the development of other products such as Exchange Traded Products (ETPs) and Index Futures.

NSE explained that the Index would provide a tracking mechanism for PFAs, CPFA and others that follow the PENCOM guidelines, adding that it can act as a benchmark for measuring performance and reporting performance to RSA Holders.

The NSE Pension Index includes the top 40 companies in terms of market capitalisation and liquidity. Adjusted market capitalisation of a listed company is the number of its listed shares, multiplied by the closing price of that company, multiplied by a capping factor.

“ Aside from the included stocks being 40, the NSE Pension index also possess the following features: The Stocks are picked based on their market capitalization from the most liquid sector. Stocks and sectors were selected in line the Pension Reform guideline. “ Companies to be included must have Free Float Factor of at least five per cent.

This is the first index on the NSE that gave consideration to Free Float Companies must have paid dividend/bonus at least once in the last five year.

“ It is a Total Return Index so that it can accurately measure equity portfolio performances, which capture returns from dividends, price changes and realized gain Total Return Index will only be available end of day. There will be no intra-day values,” it added.