KP-Dragon Index Expanded to 20 Component Stocks
Kyiv, February 2, 2006 – Dragon Capital’s equity research team added ten new stocks to the KP-Dragon index as of February 1, doubling its membership to reflect the Ukrainian market’s significant broadening over the past year and ensure that the index, published jointly with the Kyiv Post newspaper, continues to capture the full scope of local stock market activity.
After years of feeble trading limited to a handful of stocks, the Ukrainian stock market exploded last year on the back of high expectations associated with the election of a pro-West president in December 2004. Many stocks in the banking, machine-building, mining, and steel sectors, which had been dormant for years, suddenly returned from oblivion as investors shifted from the narrow segment of well known blue chips to undervalued second- and third-tier names. The most actively traded of those became members of Dragon Capital’s index as of yesterday.
KP-Dragon’s new large- and mid-cap components include Bank Aval and Ukrsotsbank (banking), Dniprooblenergo and Zhytomyroblenergo (energy distribution), LuAZ and MZVM (machine-building), Dniproshyna (chemicals), Azovstal (metallurgy – steel), Poltavskiy GOK (mining), and Zaporizhkoks (metallurgy – coke). Prior to their inclusion, KP-Dragon consisted of Centrenergo, Dniproenergo, Donbasenergo, Kyivenergo, NPR, Stirol, Ukrnafta, Ukrtelecom, Zakhidenergo, and Zaporizhstal.
KP-Dragon remains a free float market cap weighted index. "This approach, in our view, gives the most accurate picture of the Ukrainian stock market, better reflecting the stocks’ actual liquidity and providing for a more balanced weighting system due to a wide market cap range in the index," said Andriy Dmytrenko, Dragon Capital’s Head of Research.
As of February 1, Ukrnafta had the largest weighting within the index of 19.6%, followed by Poltavskiy GOK with 16.3% and Zakhidenergo with 8.9%. The KP-Dragon index closed at 3,387 on February 1, up 4% YTD, following a 42% surge in 2005. Despite its robust growth since 2002, the index is still 18% below its peak in September 1997. As of February 1, the index’s total market capitalization was USD 13.9 bil., or 48% of the total capitalization of companies listed on the PFTS, Ukraine’s principal stock exchange.
Dragon Capital, in cooperation with the Kyiv Post, launched KP-Dragon in August 2000. Since then, the index has become the leading tool for tracking performance of the Ukrainian stock market. In 2002, the British financial magazine Euromoney recognized KP-Dragon as “the first reliable index in the Ukrainian market,” citing it as one of the reasons for awarding Dragon Capital its Best Equities House in Ukraine 2002 accolade. Dragon Capital also received the Best Equities House in Ukraine award from Euromoney in 2004 and 2005.
The KP-Dragon index is calculated daily, at the close of PFTS trading. The index base was set at 1,000 on May 5, 1997. This starting date was chosen because only then were Ukraine’s financial markets developing the liquidity needed to make an index meaningful.
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