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S&P and ASX announce Index review
On 18 May 2006, S&P and ASX announced several new index proposals, with full details provided in two new market consultation papers. We would particularly appreciate feedback from our listed companies, as these proposals have been designed to provide you with more flexibility, transparency and/or visibility. Market feedback will be sought until June 14, 2006.
On 18 May 2006, S&P and ASX jointly announced the release of two consultation papers:
We would particularly appreciate feedback from our listed companies, as these proposals have been designed to provide you with more flexibility, transparency and/or visibility.
Follow the instructions in the consultation paper/s to participate in the feedback process. Market feedback will be sought until June 14, 2006, with final arrangements announced to the market in late June.
ASX & S&P are reviewing the current treatment of foreign-domiciled companies with the aim of increasing the attractiveness of an ASX listing to foreign companies that acquire significant ASX-listed companies, thus creating further investment opportunities for Australian investors.
The proposed changes also allow large Australian companies re-domiciling in another market to remain in the index if their Australian market capitalisation reaches the index-inclusion thresholds and they have sufficient liquidity in the Australian market. At the same time, the inconsistencies that currently exist in the index treatment of foreign-domiciled companies will be removed.
The proposed changes are:
- The S&P/ASX index treatment of foreign-domiciled companies will be altered so that foreign companies listed on the ASX may be considered for inclusion in the S&P/ASX indices based upon their Australian capitalisation and liquidity, and under a more transparent and consistent index methodology.
- The S&P/ASX 50 index will no longer be included in the S&P Global 1200. It will continue as part of the Australian index suite.
- Specifically for the S&P Global 1200, S&P will develop a new index that will list Australian- and New Zealand-domiciled companies and exclude foreign-domiciled companies. This index will be called the SPANZ 50.
For more information, download the consutation paper - Index Treatment of Foreign Domiciled Entities (PDF 258KB). The document Proposed Index Changes: Questions and Answers provides useful background material.
In recognition of the importance and significance of the Metals & Mining and Gold industries to the Australian economy and equity markets, S&P and ASX are proposing to introduce the following two new Resource sub sector indices to the suite of real-time S&P/ASX indices:
1. S&P/ASX 300 Metals & Mining Index
Will provide markets with additional detail on the mining sector, and complement the existing real-time S&P/ASX 200 Energy index. The S&P/ASX 300 Metals & Mining index constituents would be entities included in the S&P/ASX 300 index that are classified as being in the Metals & Mining industry.
The proposed index is relatively concentrated, with BHP Billiton potentially comprising 57% of index weight and RIO 13%. The five largest stocks comprise 81% of index weight within the proposed S&P/ASX 300 Metals & Mining index.
2. S&PASX Gold Index
Intended primarily as a market indicator index for the large number of gold companies listed on the ASX. For this reason it is currently proposed that the S&P/ASX Gold index be based on the All Ordinaries index.
The main advantage of basing the planned Gold index on the All Ordinaries index universe is that it allows for a broader index constituency, as the All Ordinaries index has around 500 constituents in total. Currently an S&P/ASX Gold index based on the All Ordinaries Index would have around 30 constituents, whereas an S&P/ASX Gold index based on the S&P/ASX 300 index would have around 20 constituents.
This index is likely to be highly concentrated on the basis of current entity weights. For this reason, it is proposed that the weight of any entity in the S&P/ASX Gold index be capped, with the cap possibly set at 15%. This methodology would mean that the weight of any individual stock in the S&P/ASX Gold index cannot exceed 15%.
Capping will enable the index to be more reflective of the broader gold sector constituents, but does mean that the index will not reflect the actual market weights of the constituents.
If you are a listed company in the resources sector, we would particularly appreciate feedback from you about the proposed new indices and how you think they will benefit you and/or your industry.
For more information, download the consutation paper - New real-time Resources & Mining Indices for the Australian Market (PDF 207KB). The consultation paper includes a list of those companies that would be in each of the proposed indices if they were available now.
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