ASX media release - New Flexibility in Expanded All Ordinaries Index

26 March 1999

ASX proposes to expand its trademark All Ordinaries Index to 500 companies and build a new package of sub-indices within it to reflect the growth and structural change in the Australian share market.

The All Ordinaries Index will move from its current 253 companies to 500 companies with the primary selection criterion being market capitalisation.

Using the All Ordinaries as an umbrella index, ASX proposes to create a package of sub-indices to be used as investment benchmarks by the investment community. The proposal builds on the concept outlined in the ASX’s All Ordinaries discussion paper issued in January this year.

Subject to further discussion with the market, the package of sub-indices is likely to include an ASX 50, ASX 100, ASX 200, and ASX 300. These sub-indices would be based on market capitalisation and liquidity.

The proposal has emerged after consultation with the complete range of All Ordinaries user groups, including a number of special interest groups and the ASX Index Advisory Panel. The 11-member panel draws on representation from investment institutions through the Investment & Financial Services Association and the Association of Superannuation Funds of Australia, asset managers, listed companies, stockbrokers, and the Sydney Futures Exchange.

The detailed specifications of the new index structure are subject to further work and discussion with All Ordinaries users. However, the transitional process is expected to have minimal impact on the current All Ordinaries measurement.

"It is vital that the All Ordinaries Index continues to reflect the performance of the market and be accepted by the complete range of users," said ASX Managing Director Richard Humphry.

"Our consultation focus was to achieve an appropriate index structure for the broader investment community and their different investment styles. Each wanted to use the All Ordinaries Index as the preferred benchmark.

"The concept of a broad All Ordinaries Index together with investment benchmark sub-indices offers the market choice and flexibility to suit the range of investment styles and requirements. All groups are catered for. Importantly, the in-built flexibility of this proposal means that the All Ordinaries can readily accommodate future changes in investment styles."

An expanded All Ordinaries Index of 500 companies will allow more than 99 per cent of domestic market value to be reflected in the umbrella index. The All Ordinaries will continue to be the ASX headline index for describing how the market has moved. This meets community expectations that ASX’s flagship market measure be as broad as possible. Examples of such indices in overseas markets include the FTSE All Share and the Tokyo Stock Exchange’s Topix.

Mr Humphry said ASX would provide a tailored series of sub-indices within the All Ordinaries. They would enable trustees and asset managers to align investment mandates with the index most suited to their needs. This will also help them to assess the performance of their fund manager against the set benchmark.

"The market will be given ample time before the introduction of the new package to allow any changes necessary to investment mandates. ASX will assist asset managers and trustees during the process of implementing the new index package."

"With continued co-operation from the broader investment community, we aim to implement the new package in October, 1999," Mr Humphry said.

Further details will be announced at a later date once the technical specifications have been finalised.

Mr Humphry acknowledged the high level of industry co-operation that ASX had received during the consultation process across the range of All Ordinaries user groups.

NB: The All Ordinaries Index currently has 253 companies. Over the 90s the average number has been 285 and the largest was 330. Its smallest number was 228.