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INVESTMENT FINANCE
M Ghani
BBS (B&F)
KSE 30 INDEX
Intro…
• 30 companies.
• Index calculation.
(Free-float market capitalization methodology).
• Index construc...
FREE - FLOAT METHODOLOGY
• Total shares available for trading at the stock exchange.
• Excludes the shares held by
control...
OBJECTIVE AND DESCRIPTION
• Free-Float calculation can be used to construct stock indices for better market
representation...
FREE-FLOAT CALCULATION
METHODOLOGY
• Total Outstanding Shares XXX
• Less: Shares held by Directors/sponsors XXX
• Governme...
DETERMINING FREE-FLOAT FACTOR
• The listed companies shall submit their pattern of shareholding, in the
prescribed manner,...
FREE-FLOAT BANDS
• % Free-Float Free-Float Factor
• >0 – 5% 0.05
• >5 – 10% 0.10
• >10 – 15% 0.15
• >15 – 20% 0.20
• >20 –...
TO QUALIFY FOR INCLUSION IN
KSE-30 INDEX
• Defaulters or its trading is suspended, declared Non-Tradable.
• Open-End and C...
SELECTION CRITERIA
• Free-Float market capitalization.
(outstanding free-float shares*closing market price).
• Liquidity.
...
FINAL RANK
Top 30 companies on the basis of final ranking.
• 50% weightage on the basis of free-float market capitalizati...
KSE-30 INDEX BASED ON JUNE 30,
2005
KMI 30 index
• Same process.
• But selection criteria varies.
ELIGIBILITY CRITERIA
• For any stock to be Shar’iah compliant, it must meet ALL six criteria.
1: BUSINESS OF THE INVESTEE
COMPANY
• The core business of the company should not violate any principle of Shar’iah.
• con...
INTEREST BEARING DEBT TO TOTAL
ASSETS, <37%
Any interest bearing debt including
• Conventional Bank Loans,
• Issuing pref...
3: NON-COMPLIANT INVESTMENTS TO
TOTAL ASSETS, <33%
• Conventional money market instruments,
• Interest bearing bank deposi...
4: NON-COMPLAINT INCOME TO
TOTAL REVENUE, <5%
 Non Compliant Income includes income from.
• Gambling,
• Gharar,
• Any pen...
5: ILLIQUID ASSETS TO TOTAL
ASSETS, >25%
The Sum of all those assets whose trade price can deviate from par value, accord...
6: NET LIQUID ASSETS/SHARE VS
MARKET PRICE/SHARE
• Market Price per share should be at least equal to or greater than net ...
AS KSE 30 INDEX
• Defaulters or its trading is suspended, declared Non-Tradable.
• Open-End and Closed-End Mutual Funds wi...
DIFFERENCES
•KSE 100 index
•KSE 30 index
•KMI 30 index
Investment finance
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Investment finance

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KSE 100 index
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Investment finance

  1. 1. INVESTMENT FINANCE M Ghani BBS (B&F)
  2. 2. KSE 30 INDEX Intro… • 30 companies. • Index calculation. (Free-float market capitalization methodology). • Index construction methodology. • Index flexibility. (each company is for index). • Full-Market capitalization methodology. (large market capitalization). • Index points 10,000. • Base year 2005.
  3. 3. FREE - FLOAT METHODOLOGY • Total shares available for trading at the stock exchange. • Excludes the shares held by controlling directors sponsors, Promoters, Government.
  4. 4. OBJECTIVE AND DESCRIPTION • Free-Float calculation can be used to construct stock indices for better market representation. • It gives weight for constituent companies as per their actual liquidity in the market. • Free-Float can be used for regulatory purposes such as risk management and market surveillance (NASDAQ unit).
  5. 5. FREE-FLOAT CALCULATION METHODOLOGY • Total Outstanding Shares XXX • Less: Shares held by Directors/sponsors XXX • Government Holdings as promoter/acquirer/controller XXX • Shares held by Associated Companies (Cross holdings) XXX • Shares held with general public in Physical Form XXX XXX • Free-Float: XXX
  6. 6. DETERMINING FREE-FLOAT FACTOR • The listed companies shall submit their pattern of shareholding, in the prescribed manner, to the Exchange. The Exchange will determine the free-Float factor for each such company.
  7. 7. FREE-FLOAT BANDS • % Free-Float Free-Float Factor • >0 – 5% 0.05 • >5 – 10% 0.10 • >10 – 15% 0.15 • >15 – 20% 0.20 • >20 – 25% 0.25 • >25 – 30% 0.30 • > … … • > … … • > … … • > … … • >90 – 95% 0.95 • >95 – 100% 1.00
  8. 8. TO QUALIFY FOR INCLUSION IN KSE-30 INDEX • Defaulters or its trading is suspended, declared Non-Tradable. • Open-End and Closed-End Mutual Funds will not be eligible. • Securities available in the Central Depository System. • Listing history of at least two months on KSE. • Record of at least one financial year. • Minimum free-float shares of 5% of total outstanding shares.
  9. 9. SELECTION CRITERIA • Free-Float market capitalization. (outstanding free-float shares*closing market price). • Liquidity. buyers and sellers in the market, best bid price and the best offer price, average, best price to trade.
  10. 10. FINAL RANK Top 30 companies on the basis of final ranking. • 50% weightage on the basis of free-float market capitalization. • 50% weightage to the liquidity based of the securities. • Highest free-float market capitalization. • Lowest Impact cost.
  11. 11. KSE-30 INDEX BASED ON JUNE 30, 2005
  12. 12. KMI 30 index • Same process. • But selection criteria varies.
  13. 13. ELIGIBILITY CRITERIA • For any stock to be Shar’iah compliant, it must meet ALL six criteria.
  14. 14. 1: BUSINESS OF THE INVESTEE COMPANY • The core business of the company should not violate any principle of Shar’iah. • conventional banks, • insurance companies, • leasing companies or • the companies involved in some other business not approved by the Shar’iah.
  15. 15. INTEREST BEARING DEBT TO TOTAL ASSETS, <37% Any interest bearing debt including • Conventional Bank Loans, • Issuing preference shares, • Commercial Paper, • Finance Lease, • Hire Purchase, • Bonds, • TFCs, etc.
  16. 16. 3: NON-COMPLIANT INVESTMENTS TO TOTAL ASSETS, <33% • Conventional money market instruments, • Interest bearing bank deposits, • Conventional mutual funds, • Commercial Paper, • Derivatives, • Bonds, T-Bills, • etc.
  17. 17. 4: NON-COMPLAINT INCOME TO TOTAL REVENUE, <5%  Non Compliant Income includes income from. • Gambling, • Gharar, • Any penalty charged on late payments, • Insurance claim, • Addictive drugs, • Alcohol, • etc.
  18. 18. 5: ILLIQUID ASSETS TO TOTAL ASSETS, >25% The Sum of all those assets whose trade price can deviate from par value, according to the rules of Shar’iah. • Inventory of raw materials, • Work-in-process, • All fixed assets such as property, plant & equipment, stores, • etc.
  19. 19. 6: NET LIQUID ASSETS/SHARE VS MARKET PRICE/SHARE • Market Price per share should be at least equal to or greater than net liquid assets per share.
  20. 20. AS KSE 30 INDEX • Defaulters or its trading is suspended, declared Non-Tradable. • Open-End and Closed-End Mutual Funds will not be eligible. • Securities available in the Central Depository System. • Listing history of at least two months on KSE. • Record of at least one financial year. • Minimum free-float shares of 5% of total outstanding shares.
  21. 21. DIFFERENCES •KSE 100 index •KSE 30 index •KMI 30 index

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