EDUCATIONAL INSIGHTS

WHAT'S NEW IN THE TOP 40? MARCH 2018 INDEX REVIEW

Article by Satrix Investments

A summary of the March 2018 FTSE/JSE quarterly index review

TOP 40 CHANGES

At the March 2018 index review we will see quite a few constituent changes to the Top 40 index. According to the index rules, a security will be included in the index if it rises to position 35 or above, when the eligible securities are ranked by investable market capitalisation. A security that falls to position 46 or below will be excluded. Below are the changes to the FTSE/JSE Top 40 index:

HOW IT WORKS

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 are rebalanced quarterly in March, June, September and December.

There are various elements of the index calculation that can change, for example a company's number of shares-in-issue can change, 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.


SECTOR INDICES

Looking at two of the FTSE/JSE sector indices we track, Capped Resi 10 and Fini 15, once the index review rules were applied, the result was that the shares that make up these indices remain the same for this March quarterly review. 

The review of the FTSE/JSE Indi 25 index resulted in Steinhoff International being deleted and Barloworld Ltd being included. Investors should note that the benchmark of the Satrix Indi ETF will change to the Capped FTSE/JSE Indi 25 index effective 19 March - the constituents are exactly the same, but capping is applied so that no stock will have a weighting higher than 30% at index review dates.


The RAFI 40

The constituents of the FTSE/JSE Rafi 40 index are only reviewed once a year, in March. The constituent changes are as follows:

SUMMARY OF INDICES WE TRACK AT SATRIX

Below we highlight the change in constituents that will be applied to the FTSE/JSE index series at the March 2018 review.

The March index review is effective on Monday 19 March 2018. 

POSTED : 16 MARCH 2018

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