Bourse publishes proposal and calls for comments, writes Mark Randall
The JSE has engaged with clients and there appears to be widespread support to change the index rulesStock market indices are one of those background elements of the investment ecosystem that people rarely interrogate closely. The FTSE/JSE all share index, or one of its variants, is a useful tool to report on market performance for the day.
A company with a large market capitalisation will have a larger weighting in the index than a company with a smaller market capitalisation. Consider Naspers, which has a huge market capitalisation of R950bn. In the FTSE/JSE Swix all share index, Naspers has a weight of nearly 17%. Investors who are bullish on future Naspers performance would therefore want to invest more than 17% of their total portfolio in Naspers to outperform their benchmark.
Since its introduction in 2016, many local equity managers have chosen to use the capped Swix all share index as their fund benchmark to manage their concentration risk more effectively. Because of the dominant way the Prosus valuation affects the Naspers price, some investors believe a Naspers investment provides almost identical economic exposure to a Prosus investment, even though they are two separately listed companies.
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