EDUCATIONAL INSIGHTS

WHAT'S NEW IN THE TOP 40? DEC 2019 INDEX REVIEW

Article by Satrix Investments

A summary of the December 2019 FTSE/JSE quarterly index review, effective Monday 23 December 2019.


TOP 40 CHANGES

At the December 2019 index review we see Aspen Pharmacare re-entering the Top 40 index while Exxaro Resources will be excluded. Aspen Pharmacare was excluded at the September review, but is again eligible for the Top 40 this quarter. 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. The same constituent change is also applicable to the equally weighted version of the Top 40 index.

HOW IT WORKS

Index changes are dictated 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.


SUMMARY OF INDICES SATRIX TRACKS

Below we highlight some other constituent changes that will be applied to the FTSE/JSE index series at the December 2019 review. This quarter most indices retain their current constituents.

SECTOR INDICES

Two of our sector ETFs (Satrix Indi 25 and Satrix Resi 10) track capped indices. Capping is applied at 30% and this means that no company in the index will have a weighting higher than 30% at index review dates.


NO CONSTITUENT REVIEW THIS QUARTER

The constituents of the FTSE/JSE Dividend + Index are reviewed twice a year in March and September.

The constituents of the FTSE/JSE Rafi 40 index are only reviewed once a year, in March. A capping of 10% is applied to this index at each quarterly review.


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POSTED : 20 DECEMBER 2019

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