Available index in Kenya:

The Nairobi Securities Exchange (NSE) was established in 1954 as the Nairobi Stock Exchange,
based in Nairobi the capital of Kenya. It was a voluntary association of stockbrokers in the
European community registered under the Societies Act in British Kenya. The NSE has two
markets, the equities market where shares are traded and the bond market where bonds (papers
issued by the government and companies as a means of borrowing money) are traded.

The NSE currently has 6 market indices;

1. The NSE 20 Share Index,

2. NSE All Share Index (NASI),

3. FTSE NSE Kenya 15 Index,

4. FTSE NSE Kenya 25 Index,

5. FTSE NSE KE Government Bond Index and

6. NSE 25 Share Index.

Construction process:

The NSE 20 Share Index:

The NSE 20 Share Index is a price weight index calculated as a mean of the shares of 20 public,
listed companies. They are selected based on a weighted market performance during the period
under review based the following criteria:

 Trading activity measures weighed in the ratio of 4:3:2:1. I.e. Market Capitalization

40%, Shares traded 30%, Deals/liquidity 20%, and turnover 10%.
 A company must have a free float of at least 20%.
 Must have a minimum market capitalization of Kshs. 20 million.
 A company should ideally be a blue chip with superior profitability and dividend record.
NSE All Share Index (NASI):

In 2008, the NSE All Share Index (NASI) was introduced as an alternative index. Its measure is
an overall indicator of market performance. The Index incorporates all the traded shares of the
day. Its attention is therefore on the overall market capitalization rather than the price
movements of select counters. In April 2008, NSE launched the NSE Smart Youth Investment
Challenge to promote stock market investments among Kenyan youth.

The objective of the challenge is threefold:

 To occupy the minds of the youth positively and draw them away from the negative
energy created by the current political, economic and social situation in the country;

 Encourage the culture of thrift and saving funds amongst the university students;

 Encourage the youth to invest their savings in the capital markets.

FTSE NSE Kenya 15 and FTSE NSE Kenya 25 Index:

In November 2011 the FTSE NSE Kenya 15 and FTSE NSE Kenya 25 Indices were launched.
The launch of the indices was the result of an extensive market consultation process with local
asset owners and fund managers and reflects the growing interest in new domestic investment
and diversification opportunities in the East African region.

The FTSE NSE Kenya 15 Index, which tracks the performance of the largest fifteen stocks
ranked by market capitalization.

FTSE 25 Kenya Index, which tracks the performance of the twenty five most liquid stocks at the
NSE, have exposed stocks included in those induces to foreign investors.

In March 2012 the delayed index values of the FTSE NSE Kenya 15 Index and the FTSE NSE
Kenya 25 Index were made available on the NSE website www.nse.co.ke. The new initiative
gives investors the opportunity to access current information and provides a reliable indication of
the Kenyan equity market’s performance during trading hours.

FTSE NSE KE Government Bond Index:

The FTSE NSE Kenyan Shilling Government Bond Index is designed to measure the
performance of the Kenyan government bond market. The purpose of the FTSE NSE Kenyan
Shilling Government Bond Index is to measure the market capitalisation weighted performance
that holders of the relevant types of bonds experience over time. This is achieved by creating a
representative portfolio of bonds, and measuring their performance. At the end of each month the
constituents of the portfolio are reviewed. During the review, bonds may be removed or added to
the index portfolio. It is assumed that any rebalancing does not have a cost. The contents of a
portfolio do not change during any month, except in exceptional circumstances.

NSE 25 Share Index:

The main reason the Nairobi Securities Exchange launched this index on October 2, 2015 was
‘with a view to provide the Exchange with opportunities to develop structured products in the
equities and the upcoming derivatives market.

The criteria used in selecting the companies for the NSE 25 Share Index are as follows:

 Shares must have their primary listing on the Nairobi Securities Exchange.

 A company must have a least 20% of its shares quoted on the NSE.

 A company must have been continuously quoted for a least 1 year.

 A company must have a minimum market capitalization of KES 1 billion

 Should ideally be a “blue chip” superior profitability and having a dividend record.