The Nairobi Stock Exchange has introduced a new share index. The NSE chairman, Jimnah Mbaru said that the all new share index will be complimentary to the NSE 20 share index but will not replace it.
This move is part of recommendations by the International Finance Corporation (IFC) and regulators of world stock markets and is aimed at ensuring a comprehensive dissemination of market information to investors.
The new NSE All-Share index (Nasi) is designed to capture the overall behavior of the stock market to give investors the feel of the direction the market is heading. Unlike the 20 Share Index, which measures price movement in selected, relatively stable and best performing 20 listed companies, Nasi incorporates all listed companies irrespective of their performance and their time of listing.
Nasi will be calculated based on market capitalization. This means that it will be a reflection of the total value of all listed companies at the NSE.
The NSE-20 Share index has been criticized for failing to transmit the right signals on the entire market performance to potential investors. According to Mr. Mbaru, adoption of Nasi will attract more foreign investors who will now be able to assess the general direction of the overall market. Its success is expected to open doors for other indices.
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