NSE Islamic Index Okays 15 Stocks To Review Performance Bi-annually

The Guardian, Capital Market – August 01, 2012 -- 
To ensure compliance for inclusion, the Islamic Equity Index is to review the performance of stocks on a bi-annual basis. Speaking during the unveiling of the index yesterday, the Managing Director of Lotus Capital, Mrs. Hajarat Adeola, 

said the index was created to track the performance of Shari’ah compliant equities trading on the floor of the Nigerian Stock Exchange (NSE). Adeola explained that the index comprises of 15 stocks, which have met the eligibility requirements of Shari’ah advisory board. Prominent among the companies are Dangote Cement Plc, Ashaka Cement Plc, Larfage Cement WAPCO Plc, Nahco Plc, Unilever Plc, Nestle Plc, Cement Company of Northern Nigeria Plc and Cadbury Plc, Giving details of the index, Adeola explained that each stock in the index undergone a two- stage screening process, adding that those companies that pass the initial test are evaluated on the basis of Islamic financial screens to eliminate those with unacceptable levels of debt, cash and interest income.

 

According to Adeola, only companies that pass the second stage would be considered for further analysis, pointing out that other criteria such as liquidity and market capitalisation of the equities are also taken into account. “Each sector weight is capped at 40 per cent and each component stock is capped at 30 per cent and the index is rescreened, rebalanced and reviewed bi-annually on the first business day in January and July of every year,” said. The financial services sector, tobacco, alcohol beverage, among others are excluded from the Lotus Islamic index. In his submission, the Chief Executive Officer, NSE, Oscar Onyema said the event marks another milestone in the Rebirth, Growth and Transformation of the Nigerian capital market. He described the step as “one of the many steps we are charting to bring to fruition our vision of becoming the gateway to African markets”. Onyema said the NSE Lotus Islamic Index (NSE LII) consists of companies whose business practices are in conformity with the principles of Shari’ah, adding that “we believe that it will increase the breadth of the market and create an important benchmark for investments as the alternative non-interest investment space widens”. “We are positive that this bold step will bring on board various ethical investors who were previously not sure about the suitability of investing in stocks, to embrace the market”. He added that the index can serve as an important diversification tool for ethically minded investors and portfolio managers both locally and from around the world, who seek to profitably invest in emerging African equities market.

The Guardian Vol. 29, no. 12 270, Capital Market –Wednesday August 01, 2012

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