EDUCATIONAL INSIGHT

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

Article by Satrix Investments

At the June 2017 FTSE/JSE quarterly index review Impala Platinum will be excluded from the Top 40 index and will be replaced by Capitec Bank. 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.

To reiterate, index changes are all rules-based. Looking at the FTSE/JSE sector indices (Indi 25, Fini 15, Resi 10) as example, once the index review rules were applied, the result was that the shares that make up these indices remain the same for this quarterly review. Similarly, the index rules dictate that Capitec Bank ranks highly enough on its investable market cap to earn a place in the list of Top 40 companies, while Impala Platinum no longer makes the cut. The FTSE/JSE Dividend Plus and Rafi 40 index constituents do not get reviewed in June.

Below we highlight the change in constituents that will be applied to the FTSE/JSE index series at the June 2017 review. 

The June index review is effective on Monday 19 June 2017.


POSTED : 13 JUNE 2017

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