The Dhaka Stock Exchange (DSE) has officially launched the CNI-DSE Select Index (CDSET) – its new benchmark index for large-cap stocks.
The largest 40 companies with maximum market capitalisation, market liquidity and fundamental stability have been selected as the constituents of the new size-based index.
Banks included in the index are the Al Arafah Islami Bank, United Commercial Bank, Prime Bank, Islami Bank, Dutch-Bangla Bank, Eastern Bank, Shahjalal Islami Bank, Pubali Bank, Brac Bank, The City Bank and National Bank.
ICB and IDLC Finance are the two non-banking financial institutes included in the CDSET.
Four top pharmaceutical companies – Renata, Beximco Pharma, Acme Lab and Square Pharma – are also in the index.
From the fuel and Power sector, Meghna Petroleum, Jamuna Oil, MJL Bangladesh, Padma Oil Company, United Power, Titas Gas, Khulna Power Company, DESCO, Summit Power and Power Grid Company of Bangladesh made it on the index.
Other companies that are included in the index are LafargeHolcim Bangladesh, Olympic Industries, Ifad Autos, Marico Bangladesh, Berger Paints, Linde Bd, BSRM Steels, British American Tobacco Bangladesh, BSRM Ltd, Grameenphone, Bangladesh Submarine Cable Company, National Life Insurance and BEXIMCO.
The CDSET will be active in DSE from January 1, 2020.
The CDSET is a free-float market cap adjusted index. Free-float shares are company shares which can be bought and sold without mandatory prior disclosures.
In the current market scenario, listed companies with more than Tk4,339 crore of free-float market capitalisation will have a 10 percent weight on the index and the smallest constituent company with Tk183 crore of free-float market capitalisation will weigh 0.39 percent.
The top ten constituent companies are found to have a total of 52.86 percent weight on the CDSET.
More weight means more power to move the index.
DSE indexing papers also reveal that 11 constituent companies from the banking sector have an aggregate 32.59 percent weight on the CDSET.
Six pharmaceuticals and chemical sector companies totalled a weight of 22.46 percent.
Eleven companies from the fuel and power sector got 18.14 percent, one telecom company 9.26 percent, two food and allied product companies got 4.91 percent, selected cement manufacturers 4.2 percent, three engineering companies received 3.2 percent, two miscellaneous companies 3.02 percent and two selected non-banking financial institutions a minimum of 2.2 percent weight on the index.
Base and trail
The premier bourse in a press release on Monday said, the theoretical base date for the CDSET was December 31, 2015, and the base point was 1,000.
Backfill data suggests that the index had a 6.76 percent positive return in 2016, and gained 24.51 percent in 2017. But later in 2018, it suffered a hypothetical negative return of 16.72 percent. And over 2019 the loss is not less than 12 percent.
Finally, now the index is hovering at a zone more than 3 percent lower from its base of 1,000.
Collaboration with the Chinese strategic partner
The CDSET is an outcome of comprehensive technical collaboration plan with the DSE's Chinese strategic partner – a consortium led by Shenzhen Stock Exchange.
Shenzhen Securities Information Company Ltd, a subsidiary of the modern Chinese bourse, and the DSE have jointly developed the CDSET – the first index of planned size-based indices for the DSE.
They are also working on launching such separate indices for reflecting price movement of selected mid and small-cap companies listed with the DSE.
In the launching event of the CDSET on Monday, both the DSE and Shenzhen Stock Exchange officials expressed hope that the new indices will help attract more investors to the capital market of Bangladesh.
The DSE, after its demutualisation in 2013, had entered into a strategic partnership with Chinese exchange groups in May 2018.
Strategic partners are sought in underdeveloped or developing stock exchanges mainly for technical support to graduate to developed and flourishing ones as securities market.