Dragon Capital Introduces Hryvnia Market Rate to KP-Dragon Index Calculation Methodology
Kyiv, May 20, 2008 — Investment bank Dragon Capital has decided to update the calculation methodology used for its stock market index, the KP-Dragon, due to the growing divergence between the market and official exchange rates for the hryvnia.
Dragon Capital began applying the hryvnia versus U.S. dollar market exchange rate to the index as of May 19 instead of the official exchange rate set by the National Bank of Ukraine.
The decision to change the calculation comes as the hryvnia has appreciated by 7.8% on the Ukrainian inter-bank market since Jan. 1, 2008, reaching UAH 4.66:USD on May 19, while the NBU has kept its official rate unchanged at UAH 5.05:USD.
The change means that the KP-Dragon value for May 19 was calculated using the rate of UAH 4.66:USD, resulting in a sizeable 9.6% day-on-day gain for the index, with the exchange rate effect contributing 6.9 percentage points to the increase.
“The new approach to calculating the KP-Dragon index allows us to track the Ukrainian stock market’s performance more accurately since the official exchange rate we previously used to convert local stock prices does not reflect the hryvnia’s real market rate anymore,” said Dragon Capital Head of Research Andriy Bespyatov.
KP-Dragon index values for subsequent trading days will also be calculated based on the hryvnia’s market exchange rate.
KP-Dragon is a free float market capitalization-based index that monitors the performance of the Ukrainian market’s 20 most liquid large- and mid-cap companies, whose liquidity is judged by turnover and by bid/offer spreads and frequency of trading. Dragon Capital launched the index in August 2000, having recalculated it back to May 1997 to track the full history of the Ukrainian equity market.
KP-Dragon uses the official prices posted by Kyiv’s PFTS exchange, but they can be adjusted by Dragon Capital traders if there is an obvious anomaly. The index, which is U.S.-dollar based, is calculated daily at the close of trading on the PFTS.
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