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A Fin24 reader writes:
If the Satrix 40 is supposed to be weighted according to market cap, why does BHP Billiton [JSE:BIL] (with a cap of R612bn) have a 13.38% weighting, while British American Tobacco [JSE:BTI] (with a cap of R939bn) has a weighting of 2.03% (as at Dec 2012)?
Brett Landman, CEO of Satrix Managers, responds:
The investment objective of the Satrix 40 exchange-trade fund (ETF) is to replicate the price and yield performance of the FTSE/JSE Top 40 index (which is a market cap weighted index) as closely as possible.
FTSE/JSE calculates the index and therefore determines the constituents and their respective weightings in the index.
This calculation of the index is determined by the ground rules for the management of the calculation of the FSTE/JSE Africa Index Series (this document is available on the JSE’s website).
The entire quoted equity capital of a constituent company is included in the calculation of its market capitalisation, subject to “free float” restrictions.
Until October 2011 inwardly listed shares (such as BAT) were excluded from inclusion in the indices.
However, subsequent to the policy decision by National Treasury to reclassify inwardly listed securities as domestic assets, these shares are now eligible for inclusion in the FTSE/JSE Africa Index Series.
But any company previously classified as an inward-listed share by National Treasury on October 24 2011 has its free float adjusted to exclude non-South African shareholdings.
This adjusted free float number is used for all index-related purposes, including liquidity screening, minimum free float tests and weighting in market capitalisation weighted indices.
The effect of this is that the weighting of affected shares (such as BAT, previously classified as inward listings) is reduced for the purpose of inclusion in the respective market cap weighted FTSE/JSE indices.
As at February 25 2013, BAT’s market cap (for the purpose of inclusion in the FTSE/JSE Top 40 index) was about R104bn and its weighting is 2.191%.
BHP Billiton, on the other hand, had a market cap of R610bn and its weighting in the index is accordingly 12.850%.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
If the Satrix 40 is supposed to be weighted according to market cap, why does BHP Billiton [JSE:BIL] (with a cap of R612bn) have a 13.38% weighting, while British American Tobacco [JSE:BTI] (with a cap of R939bn) has a weighting of 2.03% (as at Dec 2012)?
Brett Landman, CEO of Satrix Managers, responds:
The investment objective of the Satrix 40 exchange-trade fund (ETF) is to replicate the price and yield performance of the FTSE/JSE Top 40 index (which is a market cap weighted index) as closely as possible.
FTSE/JSE calculates the index and therefore determines the constituents and their respective weightings in the index.
This calculation of the index is determined by the ground rules for the management of the calculation of the FSTE/JSE Africa Index Series (this document is available on the JSE’s website).
The entire quoted equity capital of a constituent company is included in the calculation of its market capitalisation, subject to “free float” restrictions.
Until October 2011 inwardly listed shares (such as BAT) were excluded from inclusion in the indices.
However, subsequent to the policy decision by National Treasury to reclassify inwardly listed securities as domestic assets, these shares are now eligible for inclusion in the FTSE/JSE Africa Index Series.
But any company previously classified as an inward-listed share by National Treasury on October 24 2011 has its free float adjusted to exclude non-South African shareholdings.
This adjusted free float number is used for all index-related purposes, including liquidity screening, minimum free float tests and weighting in market capitalisation weighted indices.
The effect of this is that the weighting of affected shares (such as BAT, previously classified as inward listings) is reduced for the purpose of inclusion in the respective market cap weighted FTSE/JSE indices.
As at February 25 2013, BAT’s market cap (for the purpose of inclusion in the FTSE/JSE Top 40 index) was about R104bn and its weighting is 2.191%.
BHP Billiton, on the other hand, had a market cap of R610bn and its weighting in the index is accordingly 12.850%.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
