All information has been collected and compiled from the Chittagong Stock Exchange Index Methodology [source: https://www.cse.com.bd/market/sectorindexdata].

Index is a statistical measure of change in an economy or a securities market. A stock index or stock market index is a measurement of the value of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool used by investors and investment analysts to describe the market, and to compare the return on specific investments. A stock market index is a number that indicates the relative level of prices or value of securities in a market on a particular day compared with a base-day figure, which is usually 100 or 1000.

CSE Indices

The primary objective of constructing market indices is to measure the performance of the market. The indices provide vital information about the current and historical behavior of the market.

At present, Chittagong Stock Exchange Limited (CSE) is managing several indices which are listed below:

• CSE All Share Price Index (CASPI)
• CSE Selective Categories Index (CSCX)
• CSE30 Index
• CSE50 (Benchmark Index)
• CSE Shariah Index (CSI) and
• Sector Wise Indices

CSE All Share Price Index (CASPI)

The only index the CSE has been maintaining since 10th October 1995 is “CSE ALL SHARE PRICE INDEX (CASPI)” 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 was the best date to start new Indices.

CSE 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 millennium) replaced the existing one.

CSE Selective Categories Index (CSCX)

CSE launched a new index named CSCX (CSE Selective Categories’ Index) comprised A, B, G & N 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.

CSE30 Index

CSE launched a completely new Selective Index incorporating 30 scrips with base date 30th December 1999 and base index 1000.

After revision in the Index Advisory Committee Meeting held on 4th Sep 2018, two-layer methods are followed for selection of listed companies in the CSE30 Index. In the first layer method, basic criteria are considered for primary selection.

Basic Criteria

1. Must be listed with the Chittagong Stock Exchange Limited.
2. 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 Five years prior to its listing.
3. Companies that did not hold their Annual General Meetings regularly will not be considered.
4. Minimum market capitalization must be Tk. 600 million.
5. 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.
6. Must have positive revenue reserve/ retained earnings.
7. Must be traded for at least 70% trading days of the six-monthly review period.
8. Declared dividend in any of the last 2 years.
9. Company having negative Earning for last two consecutive years will not be considered.
10. Company falling under settlement category ‘Z’ will not be considered.
11. Financial Institution falling under the watch list of Bangladesh Bank will not be considered provided such information is available from an acceptable source.
12. Company failing to pay the listing fees for 2 years and/or if any penalty was imposed under the securities laws in last 2 years period will not be considered.
13. At least one company from each sector having minimum ten 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 CSE30 Index.

Selection Criteria

1. Higher Net Assets Value (NAV) per share
2. Higher rate of Earning Per Share (EPS)
3. Higher rate of Dividend
4. Lower Price Earning (PE) Ratio
5. Higher Dividend Yield (DY)
6. Higher rate of free floating in equity
7. Lower Price to Book Value Ratio
8. Higher liquidity in terms of trading day
9. Higher liquidity in terms of number of contracts
10. Longer duration of continuous remaining in the CSE-30 Index

CSE50 (Benchmark Index)

CSE50 (Benchmark Index) is constructed in order to provide an appropriate benchmark for Bangladesh capital market. The index is well diversified and constitutes 50 leading and active stocks to ensure coverage of large portion of market capitalization of Chittagong Stock Exchange (CSE). CSE 50 index can be used for a variety of purposes such as benchmarking fund portfolios, launching of index funds, ETFs and structured products.

Eligibility Criteria for Selection of Constituent Stocks of CSE50

1. CSE listed securities other than Mutual Funds and Corporate bonds and securities which are classified under ‘Z’ category are eligible for index.
2. Companies should have traded for more than 75% of trading days during last 6 months period or from date of listing (whichever is latest).
3. The remaining companies are then ranked by traded values and bottom 10% companies are excluded.
4. Companies are then ranked by float adjusted market capitalization. Top 50 companies by market capitalization, from eligible universe satisfying criteria of liquidity are selected for index inclusion.

Index Re-Balancing

Index is re-balanced on semi-annual basis. Data for 6 months ending June & December each year is considered for review.

CSE Shariah Index (CSI)

The CSE Shariah Index is designed to offer investors shariah compliant investment solutions. The CSE Shariah Index comprises of all shariah compliant companies listed on CSE. The index does not have fixed number of companies and is reviewed on annual basis.

Eligibility Criteria for Selection of Constituent Stocks of CSI

1. Index comprises of shariah compliant stocks that form part of all companies listed on CSE other than Mutual Funds and Corporate bonds.
2. Shariah compliance screening is done on an annual basis. The index is reviewed on an annual basis with data ending June each year.
3. If any index constituent becomes non-shariah compliant or is delisted from the CSE, the same will undergo compulsory exclusion from the index.

Index Methodology

Security Type

1. Only the companies listed with CSE are eligible to be included in the index.
2. Inactive stocks not being traded for consecutive six months are not considered for selection.
3. Mutual Funds and Debt securities are not considered for selection in index (there is a separate index for Mutual Fund Sector).
4. Convertible preference shares and convertible debts are excluded from selection in index until conversion.
5. Warrants and stock options are excluded from selection in index.
6. A newly listed scrip is included in the index after first day trading.
7. Only Regular trades (other than bulk or foreign etc.), are considered in calculating index.
8. No changes either in number of shares or index divisor is allowed during trading session.
9. CSE Index committee reviews the index – its criteria, performance and calculation method after every six months.

Free-float Methodology

All the indices of the CSE are calculated and maintained following Laspeyres Method which was considered as the most transparent and scientific at the time of its inception. To adopt a modern and internationally accepted calculation methodology to provide a more sensitive, investable, tradable and transparently managed Index; CSE has been following Free Float Methodology of index construction since the year 2013. The constituents are free float adjusted with only the investable portion included in the index calculation.

Globally, the Free-Float Methodology of index construction is considered to be an industry best practice and all major indexes like MSCI, FTSE and S&P have adopted the same.

It generally excludes promoters’ holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course.

 Free-Float Calculation Methodology

Total Outstanding Securities

Less:     Securities held by Sponsors/Directors

Securities held by Government

Strategic stakes by private corporate bodies/individuals (any holding more than 5% held by an individual/company be considered as strategic)

Securities held by Associate Companies (Cross holdings)

Any other locked-in securities

Total Free-Float Securities

Eligibility Criteria for inclusion to the Free – float Index

Securities must be sufficiently liquid to be traded. Securities which do not have any trade during review period (6 Months) will not be eligible for inclusion in the indices until the next semi-annual review.

A security that is excluded because it fails the liquidity requirement will be excluded from all indices for the period until the next semi-annual review.

In exceptional market conditions, if trading volumes are very low, the CSE Index Committee may relax the selection criteria in terms of liquidity in order to avoid a large number of constituents being removed from the CSE Index. This discretion may not be applied to individual securities.

Size and Floatation

The security must have 5% free – float shares and trading volume during 6 months review period.

The indices values are disseminated on line to all the Global Work Stations (GWS) during trading sessions and after every three minutes the index values will be refreshed.

Index Calculation

All CSE indices are calculated using following formula:

(Free-float market capitalization of index constituents / Base Market capitalization) * Base Index Value

Index Closure Algorithm

The closing index value on any trading day is computed taking the weighted average of all the trades of index constituents in the last 30 minutes of trading session. If an index constituent has not traded in the last 30 minutes, the weighted average price of last 50 trades is taken for computation of the index closure. If an index constituent has not traded at all in a day, then its last day’s closing price is taken for computation of index closure.

Adjustment for Cash Dividend

No adjustment is required for CSE All Share Price Index, CSCX, CSE 30 Index, CSE50, CSI and CSE Sector-wise Indices. But for Total Return Index (if introduced in future), cash dividend is required to be adjusted.

In case of Special Cash Dividend (Dividend declared is more than 10% of the existing price of the stock), adjustment needs to be made to the base market capitalization. The dividend per share is subtracted from the current price of the share and new market capitalization is calculated using the theoretical price. No changes will be made to the Total Return Index.

Adjustment for Stock Dividend

The indices have to be adjusted for stock dividend at the close of record date. Adjustments should include the adjusted price of stock and the new number of shares on the ex-dividend day.

Adjustment for Right

In case of a right issue by a company, there is need for adjustment of ex-right price and the number of free float shares. To be precise, adjustments for right will be necessary in two stages:

(a) at the close of record date.

(b) at the close of subscription of right shares.

But for the sake of simplicity, a single adjustment on the second record date is recommended.

Inclusion of New Stock in the Index

The new stock should be included in the index after the close of first day trading. This means that there will be no impact of the new stock’s price change on the first day of trading of IPO in the secondary market. At the closing of first day, the new divisor has to be estimated.

Review Period/Re-composition

The indices are reviewed and/or re-composed on semi-annual basis.