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IFC LAUNCHES NEW STOCK INDEXES FOR CHINA AND ZIMBABWE


Sonia Miklas


WASHINGTON, D.C., Nov. 15 -- The International Finance Corporation's (IFC) Emerging Markets Data Base has increased its coverage of emerging stock markets to 23 with the launch of new stock indexes for the People's Republic of China as well as an investable index series for Zimbabwe. The new IFC Investable Zimbabwe index, developed in cooperation with a local brokerage firm, Sagit Stockbrokers Ltd., is made up of five stocks with a total market capitalization of approximately US$115 million dollars as of the end of October 1993. IFC created its Zimbabwe investable index in response to the country's decision in June 1993 to open its stock market to foreign portfolio investment and to allow for the free convertibility of principal, interest, and capital gains. Foreign investors may now buy up to 24% of listed Zimbabwean companies through stock market purchases. The liberalization of the Zimbabwe stock market has contributed to the recent boom of the local stock exchange. According to the IFC Investable Zimbabwe
Index, stocks had risen more than 27% in dollar terms from the end of June 1993 to the end of July 1993 and 84% in dollar terms by the end of October 1993. "IFC is happy to see the recent recovery in Zimbabwe's stock market which received quite a battering in 1992. This new investable index will help the global financial community monitor this market more closely," said Iyad Malas, Manager of the IFC's Emerging Markets Data Base, "and it complements IFC's global index for Zimbabwe, which reflects the same trend but does not take into account restrictions on foreign portfolio investors." IFC has introduced coverage of Chinese stocks for the first time, launching a China "global index" containing 81 stocks capitalized at approximately US$17 billion, and a narrower "investable index" of 16 stocks with a market value of about US$1.7 billion. The IFC Global China index includes Chinese shares listed in Shanghai, Shenzhen, and Hong Kong, while the IFC Investable China index includes only B shares and H shares, whi

ch are eligible for foreign investment. (more) Press Release No. 94/33, page 2 of 2 Developed in cooperation with the Stock Exchange Executive Council, a securities market research and policy institute headquartered in Beijing, the IFC China indexes have a base period of December 1992. "The stock markets in China have had a very dynamic year," said Mr. Malas. "They hit a high in mid-February, when the IFC Global China index was up 67% in dollar terms, and dropped precipitously to reach their low for 1993 in mid-July. The IFC Global China index remains down about 6% for the year in dollar terms. On the other hand, the IFC Investable China index has had a less volatile year, having risen about 11% in dollar terms to the end of October." The Chinese markets grew from 54 listed companies at the end of 1992 to 129 listed companies by the end of September 1993, with more listings expected to be added throughout 1994. "This increased volume of listings poses difficulties in maintaining a representative stock index,"

said Mr. Malas. For example, in May the IFC Global China index represented about 65% of the total capitalization of all listed shares. However, due to the market's expansion in new listings, the index's share of total capitalization fell to about 50% by the end of October 1993. This necessitates frequent additions to the index's constituents in order to maintain a significant level of total capitalization. IFC intends to add the Zimbabwe and China indexes to the IFC Investable Composite and regional indexes in March 1994. And, in order to keep abreast of the growth and development of emerging markets worldwide IFC, will continue to develop its index coverage. IFC, a member of the World Bank Group, is the largest multilateral source of direct loan and equity financing for private sector projects in developing countries. It is also the world's leading source of data on emerging stock markets.