The Dhaka Stock Exchange on Thursday announced it would launch a new index for the bourse with the help of international financial service firm Standard & Poor’s within four months.
‘We have planned to engage S&P for formulating a methodology for the new index for DSE,’ the bourse’s senior vice president Ahmed Rashid Lali told reporters after a meeting with the S&P business development director Koyel Ghosh at the DSE boardroom.
He said that the DSE would issue a letter of intent today to S&P and would also provide within a short time some data that the agency requested for.
He said the S&P would come up with a methodology after it analyzes last five years’ data.
The S&P methodology for new index calculation would be forwarded to the Securities and Exchange Commission for approval.
After the SEC approval the DSE will introduce the new index, he said.
‘The process would take 3 to 4 months. At first, we will run both the new index and the old one simultaneously. When the investors will get used to with the new index the old one will be removed,’ Lali said.
Earlier, an SEC committee headed by executive director ATM Tarikuzzaman proposed to introduce the free-float index from January 1 this year.
The committee dealing with the issue also proposed a calculation process of the system.
The SEC body proposed that listed companies’ sponsors-directors’ shareholding, government’s shareholding, strategic shareholding, and cross holding of associated companies would be excluded in the free-float calculation system.
An index based on the free-float method is calculated by multiplying the price of an issue by the number of shares available for trading on the market. Locked-in shares are excluded in calculating the index.
Currently, both the bourses calculate their respective indices using full market capitalisation method and many stakeholders feel these indices are inflated.
The market capitalisation shown in a free-float index is smaller than that in a total market capitalisation-based index as the former excludes the part of equity not available for trading.
The flawed computation of the index first came to light following the trading debut of Grameenphone on the stock market in November 2009 when the DSE general index gained more than 700 points in a single day.