Dow Jones Indexes and the South Asian Federation of Exchanges (SAFE) have launched the Dow Jones SAFE 100 Index and the Dow Jones SAFE Pakistan Index.
This is the first time an index has been created to measure the performance of blue-chip companies in five of the eight member states of SAFE. The five member states included in the Dow Jones SAFE 100 Index are India, Bangladesh, Mauritius, Pakistan and Sri Lanka.
SAFE is an organisation composed of 16 stock and commodity exchanges in South Asia. The federation was established in 2000 with the objective of consolidating exchange practices, and helping to streamline securities laws and regulations in the region. SAFE's permanent secretariat is located in Islamabad.
Aftab Ahmad Ch, managing director and CEO of the Islamabad Stock Exchange and secretary general of SAFE, says the Dow Jones SAFE 100 Index showcases the region as one asset class and can be used as an underlying tool for investment products on the national and international level alike.
Indeed, the Dow Jones SAFE 100 index could encourage more money to flow into Bangladesh, Mauritius, Pakistan and Sri Lanka from regional investors. Independently, these markets are considered too small by international fund managers. But when grouped together in an index, and more so in an index with India, the markets could attract more attention.
"South Asia is home to some of the most rapidly evolving financial markets worldwide," says Dow Jones Indexes president Michael Petronella. "By further developing securities markets and aiming at their regional and international integration the South Asian
Federation of Exchanges has been contributing significantly to these developments."
The Dow Jones SAFE indexes are designed to support index-linked investment products such as funds, exchange-traded funds, structured products, futures and options.
The index measures the performance of the 50 largest Indian stocks and the 50 largest stocks trading in Bangladesh, Mauritius, Pakistan and Sri Lanka. It includes three Bangladeshi, five Mauritian, 39 Pakistani and three Sri Lankan stocks and, as of March 9 this year, was down 35.5% from its base date of December 31, 2005.
The Dow Jones SAFE Pakistan Index measures the performance of the Pakistani stocks in the Dow Jones SAFE 100 Index. It has been licensed to Arif Habib Investment Management, a Pakistani asset management company, to serve as the basis of an index tracker fund. As of March 9, the index contained 39 components and was down 46.36% from its base of 1,000 on December 31, 2005.
The Dow Jones SAFE 100 Index is calculated in US dollars. The index is weighted by float-adjusted market capitalisation. The weighting of each country in the index is capped at 50% and each component is subsequently capped at 10%.
The Dow Jones SAFE Pakistan Index is calculated in Pakistan rupees. Its component weights reflect the relative float-adjusted market capitalisation weights of Pakistani stocks in the Dow Jones SAFE 100 Index.
Both indices are rebalanced annually in March. Their free-float factors, shares and weight factors are reviewed quarterly in March, June, September and December.