EDUCATIONAL INSIGHT

INDEX REVIEW - WHAT'S NEW IN THE TOP 40?

Article by Satrix Investments

At the March 2017 quarterly index review Brait will be excluded from the Top 40 index and will be replaced by Truworths. Let’s have a look at the changes for the indices we track at Satrix.

Index changes are triggered entirely by index rules. An index has a very clearly defined methodology and calculation method as specified by the index provider (eg FTSE/JSE, MSCI, S&P Dow Jones). There are specified rebalancing periods - FTSE/JSE indices for example are rebalanced quarterly in March, June, September and December. 

There are various elements of the index calculation that can change, for example a company can change its number of shares-in-issue, or there can be a change in the investability of the share (how much of the company's shares trade freely on the exchange). All these changes impact the weight of the share in the index. Satrix will replicate these changes so that the funds you invest in always mimic the index you want to track.

Below we highlight the change in constituents that will be applied to the FTSE/JSE index series at the March 2017 review. To reiterate, index changes are all rules-based. Looking at the FTSE/JSE Industrial 25 as example, once the rules were applied, the result was that the shares that make up this index remain the same for this quarterly review. Similarly, the rules dictate that Truworths ranks highly enough on its investable market cap to earn a place in the list of Top 40 companies, while Brait no longer makes the cut.

The changes are effective on Monday 20 March.

About the S&P Dow Jones index review:

S&P indices are also reviewed quarterly and the changes are effective on Monday 20 March.

The S&P South Africa Property Capped and the S&P Quality South Africa indices have no constituent changes this quarter.


POSTED : 13 MARCH 2017

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