KARACHI, Feb 24: The re-composition of KSE-100 index, which was due, would be reviewed in March and thereafter it would be placed before the Board of Directors of the stock exchange.
A notice circulated by the KSE to the members on Tuesday stated that the re-composition would be carried out in accordance with the Re-composition Rules of KSE-100 index.
"These rules provide for maintenance of the Index semi-annually by a re-composition process," stated the KSE notice adding that the existing re- composition rules provide for 27 sectors, whereas the sectors have been increased to 33, hence it was needed to amend accordingly.
The Re-composition Rules fall into two general categories: Sector Rules & Market Capitalisation rules as under:
Sector rules: Sector rules govern the selection (or deletion) of companies on the basis of being the top capitalisation stock in each of the 27 KSE sectors.
Two rules are recommended to undertake selection in this areas: one, a time-based rule and the other a value-based rule. Application can be triggered by compliance with either rule.
Time-based rule: A company (not in the Index) that becomes the largest in its sector (by any amount of value) will enter the Index after maintaining its position as largest in the sector for two consecutive re-composition periods.
Value-based rule: A company (not in the Index) which becomes the largest in its sector by a minimum of 10 per cent greater in capitalisation value than the present largest in the sector (in the index) will enter the Index after one re-composition period.
Market Capitalization Rule: Capitalization rules govern the selection (or deletion) of companies on the basis of being among the largest capitalization companies in the stock market. Only one rule applies here: the time-based rule.
Time-based rule: A company (not in the Index) may qualify for entry if it exceeds the market capitalization value of the last stock in the Index selected on the basis of market capitalization by two re- composition periods. A qualifying company automatically pushes out the lowest capitalization selected stock in the Index.
Rules for New Issues: A newly listed company or a privatized company shall qualify for induction in the existing Index (after one re-composition period), if the market capitalization of the new or privatized company is at least 2 per cent of the total market capitalization.
The company, which is on the Defaulting Companies List and/or its trading is suspended, declared Non- Tradable (i.e NT), in preceding six months from the date of re- composition shall not be considered in the recomposition of the KSE-100 index.