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Journal of Indexes

World’s Exchanges Get Into Indexes Act

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Indexes aimed at various segments of the market, e.g. Internet stocks or small caps, have been steadily multiplying in number in recent years thanks to contributions from the major index providers and indexing's popularity boom.

But local exchanges are getting in on the action too, working in both competition and concert with big-name index providers. Recent months have seen the introduction and announcement of new benchmarks representing segments of broader markets all over the world.

EUROPE

The Copenhagen stock market launched the KFmX Index on January 7. The new index is composed of small-and mid-cap shares not included in Copenhagen's KFX index of blue-chip stocks. While the KFX's 20 components represent over 65% of the market capitalization of the Danish stock market, the KFmX represents 21%.

The Athens Stock Exchange debuted a new mid-cap index in conjunction with FTSE International. The FTSE/ASE-Mid 40 index was introduced December 9. The ASE and FTSE had already collaborated on the creation of the exchange's blue-chip index, the FTSE/ASE-20.

Mid-caps are getting a share of attention. The Benelux alliance of stock exchanges hopes to launch a mid-cap index this year to raise that segment's profile among international investors.

In Ireland, small caps are the focus of concern as institutional investors begin to focus on larger companies in the Eurozone, drawing money away from small-cap companies. On December 1, 1999, the Irish Stock Exchange launched the ISEQ Small Cap Index. The new index includes companies in the ISEQ Overall Index that have a market capitalization of EU400 million or less.

TECHNOLOGY

The technology market is, of course, another area that has investors clamoring for representation. The Paris Bourse planned its launch of two information technology indexes for the first quarter: An "all-share" index composed of all IT stocks listed on the Paris Bourse, accompanied by a smaller index of 50 stocks selected for large market capitalization and high liquidity. The Scientific Council, which reviews the CAC 40 benchmark, will also manage the new indexes. The tech indexes were originally expected to launch in the fall of 1999 but were delayed due to technical problems and concerns about Y2K.

At the beginning of March, the Korea Stock Exchange launched its new KOSPI IT index of 65 information technology stocks. The vast majority of the companies are IT equipment manufacturers, but the index also includes service providers and e-commerce retailers. The component list is characterized by such well-known companies as Samsung Electronics, Hyundai Electronics Industries, Korea Telecom, SK Telecom, and Samsung Corporation. The exchange also launched the KOSPI 50 and KOSPI 100 indexes. The indexes represent the 50 and 100 largest companies, respectively, in the KOSPI 200 as determined by market capitalization.

The Australian Stock Exchange is also discussing the construction of a technology index, but has run into difficulty determining just how it should define a technology stock for the purposes of the index.

In Israel, the Tel Aviv Stock Exchange planned to introduce its own technology index, the Tel-Tech, on April 2; the new index was designed to include 44 technology stocks from the electronics computers and life sciences sectors. Companies are weighted by market capitalization but capped at 6% of the index; a minimum market capitalization of $10 million is required for inclusion.

MORE IN ISRAEL

Tech stocks aren't the only thing happening on the TASE. Recently, the exchange introduced the TA 75. The index, launched on January 16, 2000, includes shares in the TA100 except for the largest 25 shares. Those 25 shares compose the TA 25 Index and account for over half the exchange's market capitalization. The TA 75 is weighted by market capitalization.

Also in the works is a 20-component index of Israeli companies listed on the Nasdaq Stock Market. The index is partially a response to the refusal of Israel's Securities Authority to approve dual listing. The TASE has been losing companies to Nasdaq and European exchanges. Ninety-four Israeli companies are currently listed on Nasdaq. Nasdaq is assisting in the launch of the Isradaq 20, which is expected to take place this year. Options will be issued on the index and traded on the TASE.

HONG KONG

On March 20 the Hong Kong Stock Market introduced the Growth Enterprise Index for stocks listed on Hong Kong's Growth Enterprise Market (GEM). The index includes the 16 stocks traded on the GEM and is weighted by market capitalization.

 

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