CSE ALL SHARE PRICE INDEX

A good market representative index should involve:

• Scientific calculation formulas with clear adjustment procedure
• Logical scrip selection criteria
• Distinct base date
• Meaningful base value

The only index the CSE has been maintaining since 10th October 1995 is a ALL SHARE PRICE INDEX using Chained Paasche method. It faces question of clarity. This index was subject to unusual ups and downs and without a distinct base value. Therefore in need of a clean slate CSE finds the date 1 January 2000 is the best date to start new Indices:

An All Share Price Index with new formula and base date 30th December 1999 (the last day of the year) and new base index of thousand (to mark the millenium) will replace the existing one and A completely new Selective Index incorporating 30 scrips with base date 30th December 1999 and base index 1000.

We have studied index of a number of bourses and found that the Laspayers Method to calculate index is regarded as the most transparent and scientific method. The method is described below in this write-up.
The following conditions will be followed while calculating the All Share Price Index:

• All Share Price Index does not necessarily mean that all the listed stocks should be considered for calculating the index. Inactive stocks not being traded for consecutive six months will not be considered in the calculation.
• Only the active scrips will be considered for calculating the index.
• Mutual Funds and Debt securities will not be considered in calculating index.
• A newly listed scrip will be included in the index after five consecutive trading days.
• Only normal trades should be considered in calculating index.
• All share price index will be calculated only once in a day - after the trading hour in the on line system.
• No changes in number of shares will be allowed during VECTOR session.
• Index committee will review the index - its criteria, performance, calculation method after every six month.
• Index Base Date is 30th December 1999
• Base Day index 1000

CSE SELECTIVE INDEX (CSE - 30)

At the beginning of new millennium a selective Index will be introduced, which is found to be very popular in almost all the developed exchanges worldwide. Here the selection criteria play a very important role in forming an index.

Criteria for a Selective Index

It provides a discussion about the important criterion for an index, which is to be used as a benchmark of performance. The criterion is that the movement of the index fully represents the aggregate movement of the index's constituent assets and that the index's returns are realizable by an investor who has held a portfolio identical to the asset mix of the index. Value-Weighted Index satisfies the above criterion.
Selection of stocks for the benchmark index should be such that it represents the whole market. In addition it will be guaranteed that the constituent stocks have high percentage coverage of the market in terms of market value. This will make it difficult if not possible for a few investors to manipulate the movement of the index.

CRITERIA FOR CSE-30 INDEX

(After revision in the Listing & Index Committee Meeting held on 28th Apr 2009)
Two layer methods are followed for selection of listed companies in the CSE-30 Index. In the first layer method, basic criteria are considered for primary selection.

BASIC CRITERIA

• Must be listed with the Chittagong Stock Exchange Limited.
• In case of IPO/New Issue, this should be on listing either with DSE or CSE for a minimum period of 2 years or remained in Commercial Production in Bangladesh for the minimum same period prior to its listing.
• Companies that did not hold their Annual General Meetings regularly will not be considered.
• Minimum market capitalization must be Tk. 200 million and at least two times of paid-up capital.
• Must have at least 20% free floating share capital. Free floating share capital shall mean the share capital which will exclude Govt's holding (other than ICB), Sponsors/Directors & their Associates' holding plus other locked-in portions.
• Must have positive revenue reserve/ retained earnings.
• Must be traded for at least 50% trading days of the six monthly review period.
• Paid dividend in any of the last 2 years.
• Company having negative Earning Per Share (EPS) for last two consecutive years will not be considered.
• Company falling under settlement category 'Z' will not be considered.
• Financial Institution falling under the problem list of Bangladesh Bank will not be considered provided such information is available from an acceptable source.
• Company failing to pay the listing fees and/or penalty imposed under the Listing Regulations of CSE for a period of 2 years will not be considered.
• At least one company from each sector having minimum seven companies will be taken in the index if the scrip satisfies the above criteria and achieves the minimum point (50 points) as evaluated on the basis of the following Selection Criteria. The sector having less than seven companies will be considered to be a part of Miscellaneous Sector.

On being qualified on the basis of the Basic Criteria, the companies are required to meet the following further Selection Criteria to have the final berth in CSE-30 Index.

SELECTION CRITERIA

• Higher Net Assets Value (NAV) per share
• Higher rate of Earning Per Share (EPS)
• Higher rate of Dividend
• Lower Price Earning (PE) Ratio
• Higher Dividend Yield (DY)
• Higher rate of free floating in equity
• Larger number of shareholders
• Higher liquidity in terms of trading day
• Higher liquidity in terms of number of contract
• Longer duration of continuous remaining in the CSE-30 Index
• Regular payment of listing fees

Conditions to be followed while forming the selective Index:

• Only the active scrips will be considered for calculating the index.
• Mutual Funds and Debt securities will not be considered in this index.
• Only normal public market trades will be considered.
• Selective Index will be refreshed after 3 minutes time interval during online trade.
• At the time of update the Selective Index will consider the Weighted Average Price for each constituent stock. (Example annexed)
• No changes in number of shares will be allowed during the bussiness sessions.
• Index committee will review the index - its criteria, performance, calculation method after every six month.
• Index Base Date is 30th December 1999
• Base Day index is set to be 1000.

CSE Selective Categories Index - CSCX

Chittagong Stock Exchange (CSE) launched a new index named CSCX (CSE Selective Categories' Index) comprised A, B & G category companies from 14th February 2004 to replace the earlier CSE Trade Volume Weighted Index.
The Base Date of this index is 15th April 2001 (when A, B & Z category were introduced) and Base Value is set to 1000.
The new index includes all but not the Z category companies. This also excludes the companies/scrips which are debt securities, mutual funds, suspended for indifinte period and non-traded for preceding six months of review meeting. The index will be reviewed in the Index Committee Meeting after every six months like other two indices of CSE.
This index will be disseminated on line to all the Brokers' Work Stations (BWSs) during trading sessions and after every three minutes the index value will be refreshed.
According to the said bases of this index the value of the index on 11th February 2004 stands at 1165.3754. A graphical view from its inception i.e. 15th April 2001 is as below:

The construction principle of this index based on Laspeyres method like other two CSE indices, CSE All Share Price Index and CSE-30 Index. It may be mentioned here that the base value of these two indices was also set to 1000 with a base date 30th December 1999. The current values (as on 11th Feruary 2004) of CSE All Share Price Index and CSE-30 Index are 1601.54 and 1483.60 respectively.