THE Zimbabwe Stock Exchange (ZSE) has adopted the global standards for classifying stocks, which will see it change its current format and introduce 13 indices starting January 2020.
A stock market index is an aggregate value produced by combining several stocks together and expressing their total values against a base value from a specific date.
Currently, the ZSE is split across four indices — All share, Top 10, Industrial and Mining
Justin Bgoni, the bourse’s chief executive, said the exchange had adopted the Global Industry Classification Standards (GICS).
“All ZSE listed counters will be reclassified according to this framework with effect from 01 January 2020.
“As a result of the reclassification, new indices will be introduced with effect from 1 January 2020,” he said.
The new indices will include top 15 and top 25 picks, a small caps index, as well as a medium cap index. There will also be seven sector indices, a Top 10 Investable Index as well as an Export and Dual Listed Index.
“The current Industrial Index will be discontinued and redefined according to GICS while the Top 10 Investable Index will account for free float adjustment,” Bgoni said.
GICS is an industry catalogue developed in 1999 by MSCI and Standard & Poor’s for use by the global financial community.
The GICS structure consists of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries into which S&P has categorised all major public companies.
The system is similar to Industry Classification Benchmark, a classification structure maintained by the FTSE Group.
Bgoni said the new indices are expected to provide the market with better tools for performance measurement, as well as assist in sector-based investment strategies.
“As an example, a fund manager will be able to create a portfolio that focuses on investing in export and dual listed stocks and offer such portfolio as a unit trust to potential investors,” he said.
This comes two years after the exchange introduced the All Share Index and the Top 10 Index, which according to analysts, gave investors a broader picture of the market.
Market indexes are intended to represent a segment of the market or an entire stock market and thus can help investors track the market’s changes over time.
Meanwhile, Finance minister Mthuli Ncube says government will in the next three months set up a regulatory framework for Exchange Traded Funds (ETF) to support alternative capital raising avenues for local companies.
ETFs are investment funds traded on stock exchanges. These funds can hold assets such as stocks, commodities, or bonds.
In the region, ETFs are used in South Africa and in Botswana as a way to raise capital for local companies.
“There is no reason why we cannot have ETFs to raise capital like they do in Botswana,” the minister told delegates at a Daily News business meeting recently.
“I am determined that in the next three months we will launch an ETF regulatory environment in Zimbabwe,” he said.
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