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Market Consultation – 20190131 FTSEJSE Market Index Design
Market Consultation: FTSE/JSE Market Index Design
FTSE/JSE Africa Index Series
14 December 2018
1. Introduction
The broad market indices in the FTSE/JSE Africa Index Series have not fundamentally changed since the
introduction of the Capped and Shareholder Weighted index suites in 2004. The Capped SWIX All Share index
was introduced in 2016. Market indices are used for a broad range of purposes, including analytics, fund
benchmarks and index products, such as tracking funds or derivatives. Based on a number of recent discussions
in the market, FTSE/JSE is considering the value of a detailed review of the current equity market index offering.
This consultation paper sets out options that may be considered to transform the existing market index
methodology.
2. Background
Over the course of 2018, there has been an increasing amount of dialogue regarding the suitability of the
current market index design for local equity investors. There have been a number of articles in the financial
press, and these topics continue to be raised in discussions with issuers, sell-side participants and buy-side
participants. Many of the discussions have been around the most appropriate way for indices to deal with some
fundamental market constructs, such as:
* Steadily increasing concentration risk from a small number of high weight constituents
* Practical implications, and unintended consequences, of capping
* Inconsistent treatment of foreign companies (grandfathered vs. more recent listings) in terms of index
free float and therefore index weighting
* Diminishing differences between All Share weights and SWIX All Share weights after the removal of
grandfathered companies such as SAB Miller plc and Old Mutual plc
In short, the question to be answered is “what would make the best market index for local equity investors?”
FTSE/JSE suggests a participatory approach with index users to unpack some of these concerns, reach some
broad consensus on an answer to the market index design question, and potentially implement enhancements
in the FTSE/JSE Africa Index Series.
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3. Market Index Selection
The Capped SWIX All Share (J433) was introduced in November 2016 and the take-up from funds on the index
has been significant.
Even though the capping methodology is not always popular with index users, the Capped SWIX All Share index
has been selected as a benchmark for numerous funds. The index was designed as a solution to address
concentrated investment exposure to large individual companies and not necessarily to be the market index of
choice in the longer run. The fact that some significantly sized funds have moved their benchmarks away from
the SWIX All Share (J403) index to the capped version, confirms that the uncapped SWIX All Share has some
deficiencies as a broad market index.
4. Roadmap
The roadmap followed to review the FTSE/JSE market index offering is set out below.
4.1 Phase 1
Firstly, FTSE/JSE would raise awareness with the FTSE/JSE Advisory Committee (AC) regarding the intended
review of the market index design. Secondly, FTSE/JSE had to do some preparatory work that included, but was
not limited to:
* Researched the academic characteristics of an effective modern market index
* Provided a critical overview of the current FTSE/JSE market index offering
* Appraised the current users of FTSE/JSE market indices, how they are used and why they were
selected
Thirdly, FTSE/JSE would look at how the tools currently available in the index series could be leveraged to design
more suitable market indices. Examples could include SA Investor weighting, ESG hurdles, Factor Tilts or Equal
Weighting.
Fourthly, consideration would be given to how market indices in various global markets have evolved their
design, with a specific focus on emerging markets.
Lastly, the South African regulatory framework constraints and its impact on potential improvements to market
indices would be considered. An example of this is the FSCA Consultation Paper on the Implementation of a
Financial Benchmark Regulatory Regime issued on 10 September 2018.
4.2 Phase 2
FTSE/JSE would like to engage with market participants as widely as possible, so gathering information on a
market consultation and working group basis would be most suitable.
FTSE/JSE will evaluate the feedback from this market consultation and the working groups and produce a “Next
Steps” outcome which will inform the third phase of the project. The FTSE Russell Product Governance Board
would need to approve any proposed changes to the FTSE/JSE market indices before they could be finalised.
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5. Progress
Phase 1, as set out in the roadmap has been completed. Awareness was raised with the AC regarding the
intended review of the market index design at the June and September 2018 meetings. Secondly, FTSE/JSE
undertook to do some preparatory work to provide a critical overview of the current FTSE/JSE market index
offering. This work is set out in this consultation paper.
Thirdly, FTSE/JSE undertook to look at how the tools currently available in the index series could be leveraged to
design more suitable market indices. Examples could potentially include SA Investor weighting or up-weighting
foreign companies in the market index. These tools are unpacked further in this consultation paper.
Fourthly, consideration was given to how market indices in various global markets have evolved their design,
with a specific focus on emerging markets.
Phase 2, as set out in the roadmap, is now being launched by engaging market participants as widely as possible.
A workshop with ASISA members was held during September, where awareness was raised with regards to the
proposed review of the market indices. Awareness was also raised with a small pilot group of market
participants during September.
6. Emerging Market Indices
FTSE/JSE researched comparable emerging market indices to determine the characteristics of their indices. The
countries included in the research were:
* Singapore
* Turkey
* Russia
* India
* Brazil
* China
* Australia
Please refer to Appendix 3 for the full list of emerging market indices characteristics.
The emerging market indices are aligned to the FTSE/JSE All Share in that they are market cap weighted, some
by full market cap and others by free float adjusted market cap, have a liquidity screen and a free float
component. The minimum free float requirement for these indices ranges from 5% to 30%. Most of the
emerging market indices are not capped, but the Turkey (10%), Russian (15%) and Australian (15%) indices are
capped.
For the Russian indices an additional weighting factor is applied, depending on the constituent’s liquidity factor,
e.g. if the Liquidity factor is smaller than 1.25% a weighting factor of zero is applied and when the liquidity factor
is larger or equal to 10%, the weighting factor will be one. This effectively acts to down-weight companies that
are relatively illiquid. For the Singapore and Indian indices no foreign ownership restrictions are applied. In
Turkey there is only one dual listed company. The Shanghai and Shenzhen exchanges do not allow for the listing
of foreign companies.
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Unique characteristics of the emerging market indices include that liquidity may be adjusted up to 0.01% at a
review for constituents in the Singapore index. For the Russian indices, constituents require a minimum index
weight of 0.25% for inclusion and when the weight falls below 0.2%, the constituent is removed. In the Indian
index constituents are selected on average daily total market cap, annualised traded value and trading
frequency. For the China index companies need to be listed for at least six months, unless full and free float
market cap is within top 10 of all listed stocks.
Many of these emerging market index principles are captured by specific rules within the FTS/JSE indices, and
the market indices are broadly aligned in terms of methodology, despite a range of local nuances.
7. Current FTSE/JSE Market Index Offering
Factors impacting on the suitability of the current market index design for local equity investors include steadily
increasing concentration risk from a small number of high weight constituents and the inconsistent treatment of
foreign companies (grandfathered vs. more recent listings) in terms of index free float. There are also
diminishing differences between the All Share weights and SWIX All Share weights following the removal of
grandfathered companies such as SAB Miller plc and Old Mutual plc.
The current FTSE/JSE All Share offering includes the following indices:
Index Code Index Name Rank Weight Capping Liquidity
J203 All Share Gross Mcap Net Mcap No Yes
J303 Capped All Share Gross Mcap Capped Net Mcap Yes – 10% Yes
J403 SWIX All Share Gross Mcap SWIX Mcap
Mcap(Capped) No Yes
J433 Capped SWIX All Share Gross Mcap Capped SWIX Mcap Yes – 10% Yes
Table 1: FTSE/JSE All Share offering
All four versions of the All Share indices are ranked by gross market cap and therefore the constituents in these
indices are the same, the difference is in the weighting of the constituents. The difference between the All
Share (J203) and SWIX All Share (J403) indices lie in the weighting of the constituents that are done on net
market cap and SWIX market cap respectively. The SWIX free float represents the proportion of a constituent’s
share capital that is held in dematerialised form and registered on the South African share register. The SWIX
free float will not exceed the FTSE/JSE company free float. In both indices companies treated as foreign in the
Index Series will have a free float that represents the holding on the South African register. The constituents of
the relevant Top 40 and tradable indices derived from a specific market index will utilise the same free float as
the market index.
The free float for grandfathered companies in J203 represents the shareholder breakdown, and the free float in
the SWIX represents the number of shares on the South African share register. Essentially the only difference
between the All Share and SWIX All Share is the weight of grandfathered companies and companies with listed
and sponsored depositary receipt programs. It is important to note that all new companies, classified as foreign
for index purposes, utilise a SWIX market cap in all indices across the Index Series and this is why foreign
companies do not contribute to a difference between J203 and J403.
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The table below provides a list of grandfathered companies in the All Share.
Gross MCap Free SWIX Free SWIX MCap Down-weight
Alpha Instrument Net MCap (Rm)
(Rm) Float Float (Rm) in SWIX
BIL BHP Billiton 601,771 98% 16% 591,942 94,268 15.93%
CFR Compagnie 525,915 98% 16% 513,624 84,410 16.43%
AGL Anglo American
Financiere 425,435 70% 37% 298,525 159,313 53.37%
MNP Mondi Plc
Richemont AG 120,025 100% 26% 119,633 30,646 25.62%
INP Investec PLC 59,634 96% 52% 57,234 31,246 54.59%
ITU Intu Properties Plc 49,323 65% 37% 31,858 18,191 57.10%
LON Lonmin PLC 2,890 94% 38% 2,715 1,086 40.01%
Table 2: List of grandfathered companies
The table below provides a comparison of the current All Share weights on 23 October 2018. The highlighted
companies represent the five largest weights in each index.
Alpha Instrument J203 Weight J303 Weight J403 Weight J433 Weight
NPN Naspers 17.45% 9.24% 21.67% 9.17%
BIL BHP Billiton 9.05% 9.95% 1.79% 2.08%
CFR Compagnie Fin Richemont AG 7.85% 8.64% 1.60% 1.86%
AGL Anglo American 4.57% 5.02% 3.02% 3.51%
SOL Sasol 3.90% 4.29% 4.85% 5.62%
SBK Standard Bank Group 3.06% 3.37% 3.80% 4.41%
FSR Firstrand Limited 2.90% 3.19% 3.61% 4.18%
BTI British American Tobacco PLC 2.51% 2.76% 3.11% 3.61%
Table 3: Comparison of All Share weights
Key: J203 – All Share; J303 – Capped All Share; J403 – SWIX All Share; J433 – Capped SWIX All Share
8. Available Tools to Leverage
Two potential tools that could be introduced are SA Investor indices and up-weighting foreign companies in the
index series. SA Investor is an approach that weights constituents based on local South African resident
shareholdings, thereby excluding significant foreign-owned holdings from the market index weights. This is
different to the current SWIX methodology which is based on the South African share register, rather than the
sub-set of shares held by South African residents. The SA Investor index methodology excludes the
grandfathering of index constituents, thus treating all companies consistently.
The SWIX All Share index could potentially be replaced by the SA Investor index, thereby creating a market index
that is reflective of the aggregate holdings of South African equity investors, and therefore suitable as a market
index for the local investor on their local equity allocation.
The J203 and J303 could possibly be amended to treat foreign companies consistently, by up-weighting all
foreign companies and not just the grandfathered companies. “Up-weighting” refers to using the global market
cap without adjusting for the South African register, i.e. in effect removing the down-weighting of foreign
companies currently applied in the All Share index. As an example, BTI as a foreign company will be up-weighted
in the market index by reflecting the global market cap and not the South Africa register adjustment.
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The table below shows the weights of the three proposed approaches, with their capped versions:
* SA Investor: All constituents are weighted based on their aggregate SA-resident shareholding, adjusted
for free float.
* All Foreign Up-weight: All constituents have a J203 free float, but all foreign companies are weighted
consistently at their full global free float, with no register or investor nationality down-weighting.
* Current SWIX: All constituents have a J403 free float, with all companies weighted at the minimum
between their free float and SA register.
The highlighted companies represent the five largest weights in each proposed index, before and after the
application of capping factors (10%). The detail of the constituent weights is available in Appendix 1.
Alpha Instrument SA Investor Foreign Up- SWIX SA Investor Foreign Up- SWIX Capped
weight weight weight Capped weight Capped
NPN Naspers 14.57% 12.52% 23.19% 9.98%* 9.97%* 9.97%*
SOL Sasol 5.53% 2.73% 5.05% 5.83% 3.08% 5.92%
BTI British American Tob 4.61% 15.02% 2.87% 4.86% 9.28%* 3.37%
AGL Anglo American 4.42% 3.01% 2.98% 4.66% 3.40% 3.49%
FSR Firstrand Limited 4.28% 2.04% 3.78% 4.51% 2.30% 4.43%
ANH Anheuser-Busch 0.50% 9.63% 0.38% 0.52% 9.81%* 0.44%
GLN Glencore 0.66% 7.01% 0.51% 0.70% 7.91% 0.60%
BIL BHP Billiton 2.89% 6.13% 1.81% 3.05% 6.92% 2.12%
SBK Standard Bank 2.92% 2.07% 3.84% 3.08% 2.34% 4.50%
Table 4: Comparison of proposed indices weights
* Capped constituent
The three graphs below depict the weight of three different types of companies in the three proposed indices,
prior to the application of capping.
Naspers is classified as domestic for all index purposes, which is the standard for local domestic listings. There
are thus no additional restrictions on NPN’s index inclusion, other than the normal rules specified in the Index
Ground Rules, and the company is currently included in the index at its full market capitalisation, adjusted for
free float.
British American Tobacco is an inward listing and is classified as a domestic asset, but foreign for index purposes.
BTI is an example of an inward listed company that was classified by SARB as foreign for index purposes. BTI is
currently included in the index series, but at a reduced weight. FTSE/JSE does not use BTI’s total global market
capitalisation in the index series, but rather the market capitalisation of shares registered on the SA share
register, as maintained by Strate.
Anglo American is an example of a grandfathered company and is a seemingly foreign company, but treated as
domestic for all purposes, due to its South African roots.
The table below shows the split of foreign and local companies in the current All Share and the proposed market
indices. Local companies in this context have a South African ISIN assigned (“ZAE”).
Sep 2018 Sep 2017 Sep 2016 Sep 2015 Sep 2014
Foreign Local Foreign Local Foreign Local Foreign Local Foreign Local
All Share (J203) 31.51% 68.49% 34.60% 65.39% 39.98% 60.01% 40.31% 59.68% 41.66% 58.33%
SA Investor weight 24.40% 75.60% 29.21% 70.79% 32.07% 67.93% 28.40% 71.60% 29.01% 70.99%
Foreign Up-weight 54.00% 46.00% 58.24% 41.76% 59.37% 40.63% 52.02% 47.98% 54.17% 45.83%
SWIX 16.14% 83.86% 21.01% 78.99% 23.64% 76.36% 21.91% 78.09% 23.04% 76.96%
SA Investor weight Capped 25.71% 74.29% 30.75% 69.25% 32.98% 67.02% 28.40% 71.60% 29.01% 70.99%
Foreign Up-weight Capped 52.22% 47.78% 53.70% 46.30% 54.39% 45.61% 47.57% 52.43% 51.28% 48.72%
SWIX Capped 18.91% 81.09% 23.97% 76.03% 26.14% 73.86% 22.74% 77.26% 23.04% 76.96%
Table 5: Foreign and Local Split
The table below shows the SA sector weights breakdown for SA Resources, SA Industrials and SA Financials for
the current four market indices, the three proposed indices and their capped versions. Further SA sector details
are provided in Appendix 2.
Foreign
Foreign SA
SA Up- SWIX
J203 J303 J403 J433 Up- SWIX Investor
Investor weight Capped
weight Capped
Capped
SA Resources 25.56% 28.29% 17.11% 20.08% 20.39% 25.76% 17.05% 21.48% 29.08% 19.98%
SA Industrials 49.35% 43.94% 52.92% 44.75% 45.14% 56.36% 53.10% 42.19% 50.74% 45.04%
SA Financials 25.08% 27.76% 29.96% 35.16% 34.47% 17.88% 29.85% 36.32% 20.18% 34.98%
Table 6: SA Sector Weights
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9. Discussion Points / Questions
A review of the existing market index design, in collaboration with market participants, would ensure the most
effective outcome from which the final proposal can be created and would further ensure that the market index
is aligned with market requirements. The ultimate goal is to provide to local equity investors the most
appropriate and effective market indices, a fundamental building block of a healthy investment ecosystem.
FTSE/JSE requests comments from the market regarding concerns with the proposal to improve the market
index offering. The questions below are provided to guide the discourse:
* Details of respondent, including company name and industry or sector.
* Which of the existing four market indices do you use currently and for what purpose?
* How do you use the current All Share index (J203)?
* What criteria do you require from a market index?
* What specific concerns impact on your current or potential usage of these indices?
* How would changing the existing market index methodology impact on your business model? Should
there be a fundamental change to the market index methodology, how much advance notice would you
expect from FTSE/JSE?
* Which proposed market index do you prefer as possible replacement for the existing FTSE/JSE All Share
Index (J203)?
o SA Investor
o All Foreign Up-weight
o Current SWIX
o Unchanged
* Which proposed market index do you prefer as possible replacement for the existing FTSE/JSE SWIX All
Share Index (J403)?
o SA Investor
o All Foreign Up-weight
o Current SWIX (i.e. unchanged)
* Would you rather prefer only one main market index, with a capped and uncapped version? This would
see the All Share methodology and SWIX All Share methodology replaced with a single methodology.
* Would you prefer a phased approach for implementing the methodology change? If so, how should the
transition timelines be determined?
* What concerns or recommendations do you have regarding the proposed indices? Do you have
concerns regarding the enhancements as discussed in this market consultation?
* Should foreign companies be treated differently to domestic companies? Please provide reasons.
* Do you require any further data to support your decision?
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10. Responding to the Consultation
It is important to FTSE/JSE to be aware of the impact on clients as well as any unintended consequences of the
change. Therefore, FTSE/JSE requests comments on the proposed offering and questions included in this market
consultation.
Please provide us with your comments and suggestions by 31 January 2019 to the following email address:
indices@jse.co.za
FTSE/JSE would also like to meet with market participants to discuss any further comments, suggestions or
concerns. Please contact us at the email address provided above, should you wish to arrange a meeting in this
regard. All feedback received by 31 January 2019 will be carefully considered before making any final decisions,
and presented to the FTSE/JSE Advisory Committee Meeting.
When determining the timeline for the implementation of any decision, FTSE/JSE is mindful of the broad usage
of these indices in the market and the need to provide appropriate notice. This document is not confidential
and should be distributed as widely as possible to all stakeholders.
Yours Sincerely,
Indices Department
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Appendix 1
Comparison of market index weights, on review effective date, for the past five years:
Key: J203 – All Share; J303 – Capped All Share; J403 – SWIX All Share; J433 – Capped SWIX All Share
SA Investor Foreign Up-
J203 J303 J403 J433 SA Investor Foreign Up-
Date Alpha Instrument SWIX weight weight SWIX Capped
Weight Weight Weight Weight weight weight
Capped Capped
2018/09/25 NPN Naspers 18.63% 9.94% 23.28% 9.97% 14.57% 12.52% 23.19% 9.98% 9.97% 9.97%
2018/09/25 BIL BHP Billiton 9.13% 10.11% 1.82% 2.13% 2.89% 6.13% 1.81% 3.05% 6.92% 2.12%
2018/09/25 CFR Compagnie Fin Richemont AG 8.35% 9.24% 1.71% 2.01% 2.60% 5.61% 1.71% 2.74% 6.33% 2.00%
2018/09/25 AGL Anglo American 4.49% 4.97% 2.99% 3.51% 4.42% 3.01% 2.98% 4.66% 3.40% 3.49%
2018/09/25 SOL Sasol 4.06% 4.49% 5.07% 5.95% 5.53% 2.73% 5.05% 5.83% 3.08% 5.92%
2018/09/25 SBK Standard Bank Group 3.09% 3.42% 3.86% 4.53% 2.92% 2.07% 3.84% 3.08% 2.34% 4.50%
2018/09/25 FSR Firstrand Limited 3.04% 3.36% 3.80% 4.46% 4.28% 2.04% 3.78% 4.51% 2.30% 4.43%
2018/09/25 BTI British American Tobacco PLC 2.31% 2.56% 2.89% 3.39% 4.61% 15.02% 2.87% 4.86% 9.28% 3.37%
2018/09/25 MTN MTN Group 2.03% 2.25% 2.54% 2.98% 1.92% 1.36% 2.53% 2.03% 1.54% 2.96%
2018/09/25 MNP Mondi Plc 2.02% 2.24% 0.65% 0.76% 0.88% 1.36% 0.65% 0.93% 1.53% 0.76%
2018/09/25 SLM Sanlam 1.90% 2.11% 2.38% 2.79% 2.27% 1.28% 2.37% 2.40% 1.44% 2.77%
2018/09/25 ABG Absa Group Limited 1.49% 1.64% 1.86% 2.18% 1.27% 1.00% 1.85% 1.34% 1.13% 2.17%
2018/09/25 OMU Old Mutual Ltd 2.00% 2.22% 1.84% 2.16% 2.24% 1.34% 1.83% 2.36% 1.52% 2.15%
2018/09/25 ANH Anheuser-Busch InBev SA NV 0.50% 9.63% 0.38% 0.52% 9.81% 0.44%
2018/09/25 GLN Glencore 0.41% 0.45% 0.51% 0.60% 0.66% 7.01% 0.51% 0.70% 7.91% 0.60%
SA Investor Foreign Up-
J203 J303 J403 J433 SA Investor Foreign Up-
Date Alpha Instrument SWIX weight weight SWIX Capped
Weight Weight Weight Weight weight weight
Capped Capped
2017/09/18 NPN Naspers 17.54% 10.28% 21.48% 10.32% 14.79% 11.20% 21.38% 10.30% 10.26% 10.32%
2017/09/18 CFR Compagnie Fin Richemont AG 8.64% 9.40% 1.77% 2.03% 2.57% 5.52% 1.77% 2.70% 6.51% 2.01%
2017/09/18 BIL BHP Billiton 6.96% 7.57% 1.45% 1.65% 2.09% 4.44% 1.44% 2.20% 5.24% 1.64%
2017/09/18 AGL Anglo American 3.63% 3.95% 2.24% 2.56% 3.10% 2.32% 2.23% 3.26% 2.73% 2.55%
2017/09/18 BTI British American Tobacco PLC 3.53% 3.85% 4.33% 4.94% 5.61% 18.40% 4.31% 5.90% 10.03% 4.92%
2017/09/18 SOL Sasol 3.05% 3.32% 3.73% 4.26% 4.10% 1.95% 3.72% 4.32% 2.30% 4.24%
2017/09/18 MTN MTN Group 3.03% 3.30% 3.71% 4.24% 2.69% 1.93% 3.69% 2.83% 2.28% 4.21%
2017/09/18 SBK Standard Bank Group 2.84% 3.09% 3.48% 3.98% 2.61% 1.82% 3.47% 2.75% 2.14% 3.96%
2017/09/18 FSR Firstrand Limited 2.43% 2.64% 2.98% 3.40% 3.34% 1.55% 2.96% 3.51% 1.83% 3.38%
2017/09/18 OML Old Mutual 2.37% 2.58% 1.79% 2.04% 2.46% 1.52% 1.78% 2.59% 1.79% 2.03%
2017/09/18 SNH Steinhoff Int Holdings N.V. 2.27% 2.46% 2.77% 3.17% 3.31% 1.46% 2.76% 3.49% 1.72% 3.15%
2017/09/18 SLM Sanlam 1.61% 1.75% 1.97% 2.25% 1.85% 1.03% 1.96% 1.94% 1.21% 2.23%
2017/09/18 REM Remgro 1.51% 1.64% 1.85% 2.11% 1.96% 0.96% 1.84% 2.06% 1.14% 2.10%
2017/09/18 ANH Anheuser-Busch InBev SA NV 0.53% 11.34% 0.46% 0.56% 10.06% 0.52%
2017/09/18 GLN Glencore 0.37% 0.41% 0.46% 0.52% 0.72% 6.50% 0.45% 0.75% 7.67% 0.52%
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SA Investor Foreign Up-
J203 J303 J403 J433 SA Investor Foreign Up-
Date Alpha Instrument SWIX weight weight SWIX Capped
Weight Weight Weight Weight weight weight
Capped Capped
2016/09/19 NPN Naspers 14.42% 10.08% 18.73% 10.01% 12.53% 9.76% 18.64% 10.05% 10.04% 10.01%
2016/09/19 SAB SABMiller 10.97% 9.89% 2.66% 2.94% 2.89% 7.43% 2.64% 2.97% 8.56% 2.92%
2016/09/19 CFR Compagnie Fin Richemont AG 5.57% 5.97% 1.36% 1.50% 1.86% 3.77% 1.35% 1.91% 4.34% 1.49%
2016/09/19 BIL BHP Billiton 5.39% 5.78% 1.26% 1.40% 1.64% 3.65% 1.25% 1.69% 4.20% 1.39%
2016/09/19 BTI British American Tobacco PLC 3.38% 3.63% 4.39% 4.87% 5.52% 16.35% 4.37% 5.68% 9.93% 4.84%
2016/09/19 MTN MTN Group 2.98% 3.20% 3.87% 4.29% 2.55% 2.02% 3.85% 2.63% 2.33% 4.26%
2016/09/19 SOL Sasol 2.86% 3.07% 3.72% 4.11% 3.67% 1.94% 3.70% 3.77% 2.23% 4.09%
2016/09/19 AGL Anglo American 2.85% 3.05% 1.65% 1.83% 2.13% 1.93% 1.64% 2.20% 2.22% 1.82%
2016/09/19 SNH Steinhoff Int Holdings N.V. 2.80% 3.00% 3.64% 4.03% 5.07% 1.72% 3.62% 5.22% 1.99% 4.00%
2016/09/19 SBK Standard Bank Group 2.32% 2.49% 3.02% 3.34% 2.30% 1.57% 3.00% 2.36% 1.81% 3.32%
2016/09/19 FSR Firstrand Limited 2.00% 2.14% 2.59% 2.87% 3.01% 1.35% 2.58% 3.09% 1.56% 2.85%
2016/09/19 REM Remgro 1.61% 1.72% 2.09% 2.31% 2.14% 1.09% 2.08% 2.21% 1.25% 2.30%
2016/09/19 SLM Sanlam 1.53% 1.65% 1.99% 2.21% 1.86% 1.04% 1.98% 1.92% 1.20% 2.19%
2016/09/19 OML Old Mutual 2.29% 2.46% 1.92% 2.13% 2.53% 1.55% 1.91% 2.61% 1.79% 2.12%
2016/09/19 MEI Mediclinic International plc 0.86% 0.93% 1.12% 1.24% 2.16% 0.62% 1.12% 2.22% 0.71% 1.24%
2016/09/19 ANH Anheuser-Busch InBev SA NV 0.54% 13.15% 0.50% 0.55% 10.05% 0.56%
2016/09/19 GLN Glencore 0.28% 3.94% 0.28% 0.28% 4.54% 0.31%
SA Investor Foreign Up-
J203 J303 J403 J433 SA Investor Foreign Up-
Date Alpha Instrument SWIX weight weight SWIX Capped
Weight Weight Weight Weight weight weight
Capped Capped
2015/09/21 SAB SABMiller 10.77% 10.78% 4.11% 4.11% 3.77% 8.66% 4.10% 3.77% 9.46% 4.25%
2015/09/21 NPN Naspers 10.30% 10.21% 13.63% 13.51% 9.05% 8.28% 13.60% 9.05% 9.05% 10.34%
2015/09/21 CFR Compagnie Fin Richemont AG 7.72% 7.73% 2.34% 2.34% 2.90% 6.21% 2.34% 2.90% 6.78% 2.42%
2015/09/21 BIL BHP Billiton 6.95% 6.95% 1.65% 1.66% 2.04% 5.58% 1.65% 2.04% 6.10% 1.71%
2015/09/21 MTN MTN Group 4.50% 4.50% 5.95% 5.96% 3.80% 3.62% 5.94% 3.80% 3.95% 6.16%
2015/09/21 BTI British American Tobacco PLC 3.31% 3.31% 4.38% 4.39% 5.86% 17.74% 4.37% 5.86% 10.12% 4.53%
2015/09/21 SOL Sasol 3.27% 3.27% 4.33% 4.33% 4.41% 2.63% 4.32% 4.41% 2.87% 4.48%
2015/09/21 SHF Steinhoff Int Holdings 2.90% 2.90% 3.83% 3.84% 3.79% 2.33% 3.82% 3.79% 2.54% 3.97%
2015/09/21 AGL Anglo American 2.82% 2.82% 1.66% 1.67% 2.15% 2.26% 1.66% 2.15% 2.47% 1.72%
2015/09/21 OML Old Mutual 2.74% 2.74% 2.15% 2.15% 2.92% 2.20% 2.14% 2.92% 2.40% 2.22%
2015/09/21 SBK Standard Bank Group 2.44% 2.44% 3.23% 3.24% 2.57% 1.96% 3.22% 2.57% 2.14% 3.34%
2015/09/21 FSR Firstrand Limited 2.30% 2.30% 3.05% 3.05% 3.56% 1.85% 3.04% 3.56% 2.02% 3.15%
2015/09/21 REM Remgro 1.75% 1.76% 2.32% 2.33% 2.40% 1.41% 2.32% 2.40% 1.54% 2.40%
2015/09/21 GLN Glencore Xstrata plc 0.22% 3.15% 0.19% 0.22% 3.44% 0.20%
Page 12 of 18
SA Investor Foreign Up-
J203 J303 J403 J433 SA Investor Foreign Up-
Date Alpha Instrument SWIX weight weight SWIX Capped
Weight Weight Weight Weight weight weight
Capped Capped
2014/09/22 BIL BHP Billiton 10.03% 9.64% 2.96% 2.96% 3.36% 7.88% 2.94% 3.36% 8.38% 2.94%
2014/09/22 SAB SABMiller 9.28% 9.32% 4.22% 4.22% 3.88% 7.29% 4.20% 3.88% 7.75% 4.20%
2014/09/22 CFR Compagnie Fin Richemont AG 7.20% 7.23% 2.21% 2.21% 2.84% 5.65% 2.20% 2.84% 6.01% 2.20%
2014/09/22 NPN Naspers 6.99% 7.03% 9.38% 9.38% 6.24% 5.50% 9.33% 6.24% 5.84% 9.33%
2014/09/22 MTN MTN Group 6.50% 6.52% 8.71% 8.71% 5.93% 5.10% 8.67% 5.93% 5.43% 8.67%
2014/09/22 SOL Sasol 5.11% 5.13% 6.85% 6.85% 7.01% 4.01% 6.82% 7.01% 4.27% 6.82%
2014/09/22 AGL Anglo American 5.09% 5.11% 3.34% 3.34% 4.34% 4.00% 3.32% 4.34% 4.25% 3.32%
2014/09/22 BTI British American Tobacco PLC 2.97% 2.99% 3.99% 3.99% 5.51% 15.58% 3.97% 5.51% 10.26% 3.97%
2014/09/22 SBK Standard Bank Group 2.44% 2.45% 3.27% 3.27% 2.49% 1.92% 3.25% 2.49% 2.04% 3.25%
2014/09/22 OML Old Mutual 2.40% 2.41% 1.77% 1.77% 2.23% 1.88% 1.76% 2.23% 2.00% 1.76%
2014/09/22 FSR Firstrand Limited 2.11% 2.12% 2.83% 2.83% 3.38% 1.66% 2.82% 3.38% 1.77% 2.82%
2014/09/22 SHF Steinhoff Intl Holdings 2.03% 2.04% 2.72% 2.72% 2.34% 1.59% 2.70% 2.34% 1.69% 2.70%
2014/09/22 GLN Glencore Xstrata plc 0.45% 7.81% 0.49% 0.45% 8.30% 0.49%
Page 13 of 18
Appendix 2
Comparison of SA Sector weights, on review effective date, for the past five years:
SA Foreign
SA Foreign SWIX
Date SA Sector J203 J303 J403 J433 SWIX Investor Up-weight
Investor Up-weight Capped
Capped Capped
2018/09/25 SA Resources 25.56% 28.29% 17.11% 20.08% 20.39% 25.76% 17.05% 21.48% 29.08% 19.98%
2018/09/25 SA Industrials 49.35% 43.94% 52.92% 44.75% 45.14% 56.36% 53.10% 42.19% 50.74% 45.04%
2018/09/25 SA Financials 25.08% 27.76% 29.96% 35.16% 34.47% 17.88% 29.85% 36.32% 20.18% 34.98%
2017/09/18 SA Resources 21.19% 23.06% 14.22% 16.24% 15.95% 21.28% 14.15% 16.79% 25.10% 16.15%
2017/09/18 SA Industrials 54.55% 50.55% 58.01% 52.04% 51.71% 62.39% 58.20% 49.16% 55.64% 52.32%
2017/09/18 SA Financials 24.25% 26.39% 27.77% 31.72% 32.34% 16.34% 27.64% 34.04% 19.27% 31.54%
2016/09/19 SA Resources 18.71% 20.07% 13.88% 15.37% 14.27% 17.65% 13.81% 14.68% 20.34% 15.28%
2016/09/19 SA Industrials 59.59% 56.66% 59.95% 55.65% 54.85% 67.42% 60.15% 53.56% 62.46% 55.92%
2016/09/19 SA Financials 21.69% 23.27% 26.17% 28.98% 30.88% 14.93% 26.04% 31.76% 17.20% 28.80%
2015/09/21 SA Resources 18.31% 18.33% 12.60% 13.13% 14.18% 18.74% 12.83% 14.19% 20.48% 13.32%
2015/09/21 SA Industrials 58.41% 58.36% 59.27% 57.56% 52.00% 62.03% 59.12% 51.99% 58.51% 57.58%
2015/09/21 SA Financials 23.29% 23.31% 28.13% 29.31% 33.82% 19.22% 28.05% 33.82% 21.01% 29.11%
2014/09/22 SA Resources 21.64% 26.43% 20.00% 13.15% 22.40% 28.83% 20.39% 22.40% 30.64% 20.39%
2014/09/22 SA Industrials 58.07% 53.19% 55.34% 62.19% 48.86% 54.85% 55.07% 48.86% 52.00% 55.07%
2014/09/22 SA Financials 20.29% 20.38% 24.66% 24.66% 28.74% 16.33% 24.54% 28.74% 17.36% 24.54%
Page 14 of 18
Appendix 3
Emerging Market Index Characteristics
Country Index Weighting Constituents Review
Singapore FTSE ST All-Share Index Market cap weighted Plus or minus 132 Quarterly: Mar + Sept. June + Dec is new issues. Monday after third
Friday.
Turkey (Istanbul) BIST 100 BIST Indices are calculated as free float 100 Quarterly: Nov, Feb, May, August (last trading day)
market capitalization weighted.
Russia (Moscow Exchange MICEX- MOEX Russia Index (previously MICEX Market cap weighted Varies but can’t be more than 50 Quarterly (third Friday of March, June, Sept and Dec)
RTS) INDEX)
Calculated in RUB
Russia (Moscow Exchange MICEX- RTS Index (same as above but Market cap weighted Varies but can’t be more than 50 Quarterly (third Friday of March, June, Sept and Dec)
RTS) calculated in USD)
India (Bombay Stock exch) S&P BSE 500 Market cap weighted 500 Semi-annually in June and December
Brazil Bovespa Index (Ibovespa) Market cap weighted Plus or minus 60 4 month cycles: April, August and December
China (Shenzen Stock Exchange) SZSE Component Index (not to be Market cap weighted 40 Semi-annually on first trading day in January and July
confused with SZSE Composite Index
which is an index of all listed
companies, same ground rules but 500
companies)
China (Shanghai Stock Exchange) Shanghai Stock Exchange Composite Category weighted Market cap (Free Plus or minus 1480 Semi-annually after second Friday in June and December
Index (very volatile) float determines inclusion factor)
There is SSE 180 which is a
continuation of SSE30, this selects the
top 180 constituents by full market
cap, negotiable market cap ratio,
trading values and turnover ratio
Australia All Ordinaries Index (XAO) Full Market cap 500 Annually after close on the third Friday of March
S&P/ASX 300 - every 6 months in March and September)
Australia S&P/ASX 200 Float adjusted market cap and liquidity 200 Quarterly on third Friday of March, June, September and December
Page 15 of 18
Liquidity
Country Index Ranking Free Float
Constituent Non-constituent
Singapore FTSE ST All-Share Index Ranked on Full market cap 0.04% free float shares for 8/12 months 0.05% free float shares for 10/12 Companies with a free float of 15% or
months. below are excluded from the index
New listings: 20 trading days
Turkey (Istanbul) BIST 100 Ranked on Free float and liquidity No Minimum New listings: 60 days as of end of the As per CMB - Capital Markets Board of
market cap (dual ranked with market review period Turkey, calculated and announced by CRA.
cap taking precedence) Group A minimum is greater than TL 30
million
Group B minimum is greater than TL 10
million but less than TL 30 million
Russia (Moscow Exchange MOEX Russia Index (previously Ranked on free float market cap 10% for exclusion 15% for inclusion Its Free Float Factor is at least 10%; if it
MICEX-RTS) MICEX INDEX) (Annual trading volume/free float (Annual trading volume/free float falls to below 5% it will be excluded
Calculated in RUB market cap) market cap)
Russia (Moscow Exchange RTS Index (same as above, but Ranked on free float market cap 10% for exclusion 15% for inclusion Its Free Float Factor is at least 10%; if it
MICEX-RTS) calculated in USD) (Annual trading volume/free float (Annual trading volume/free float falls to below 5% it will be excluded
market cap) market cap)
India (Bombay Stock exch) S&P BSE 500 Ranked first on liquidity then on total Annualised traded value > INR 800 Annualised traded value > INR 1 N/A
market cap million billion
Trading day= 250 days. Stocks to trade Trading day= 250 days. Stocks to trade
for at least 80% of trading days for at least 80% of trading days
Brazil Bovespa Index (Ibovespa) By free float market cap The Tradability Ratio cut-off threshold An eligible stock is required to have No Minimum
for a stock to qualify for inclusion is 85% actively traded in ninety-five percent
(95%) of the trading sessions
China (Shenzen Stock SZSE Component Index (not to 1:1:1 ratio of full market cap, free No Minimum but are monitored by SSI No Minimum No Minimum
Exchange) be confused with SZSE float and liquidity (Shenzhen Securities Information Co.,
Composite Index which is an Ltd)
index of all listed companies,
same ground rules but 500
companies)
China (Shanghai Stock Shanghai Stock Exchange Ranked on free float (negotiable No Minimum No Minimum 25% or 10% if share capital is more than
Exchange) Composite Index (very volatile) shares ratio) and inclusion factor RMB 400 million
There is SSE 180 which is a
continuation of SSE30, this
selects the top 180 constituents
by full market cap, negotiable
market cap ratio, trading values
and turnover ratio
Australia All Ordinaries Index (XAO) Ranked on net market cap (free float - AOX = no minimum AOX = no minimum No Minimum
shares held by public) S&P/ASX 300 = 30%
Relative liquidity = Stock Median
Liquidity / Market Liquidity
Australia S&P/ASX 200 Ranked on IWF market cap and S&P/ASX 200 = 0.025% S&P/ASX 200 = 0.025% Minimum of 30%
liquidity
Page 16 of 18
Country Index Capping Foreign companies Unique characteristics
Singapore FTSE ST All-Share Index No capping Foreign ownership restrictions will not be applied to the Liquidity may be adjusted by up to 0.01% at a review to better reflect liquid
constituents of the FTSE ST Index Series. market of Singapore
Universe is 98% of SGX Mainboard
Fast entry market cap is Set in March and September. June and December, it is
adjusted up to cut date.
Fast Entry: full market cap of smallest company that falls within the top 68% of
the universe
Turkey (Istanbul) BIST 100 There is the BIST 100 Capped version Currently, there is only one dual listed company, namely Only one class of share can be included in the indices. Includes shares of BIST
capped at 10% DO&CO Aktiengesellschaft. Main and BIST All Stars indices, shares in List A or List B.
Russia (Moscow MOEX Russia Index 15% per individual stock, 55% for 5 An additional weighting factor (Lwi) is applied depending Stocks need a minimum index weight of 0.25% for inclusion, if that weight falls to
Exchange MICEX-RTS) (previously MICEX stocks on a stock's liquidity factor (LCi) below 0.2% it will be excluded.
INDEX) LCi LWi
Calculated in RUB <1.25% 0
1.25%-2.50% 0.12
2.5%-5% 0.25
5%-10% 0.5
?10% 1
Russia (Moscow RTS Index (same as 15% per individual stock, 55% for 5 An additional weighting factor (Lwi) is applied depending Stocks need a minimum index weight of 0.25% for inclusion, if that weight falls to
Exchange MICEX-RTS) above but calculated in stocks on a stock's liquidity factor (LCi) below 0.2% it will be excluded.
USD) LCi LWi
<1.25% 0
1.25%-2.50% 0.12
2.5%-5% 0.25
5%-10% 0.5
?10% 1
India (Bombay Stock S&P BSE 500 No capping Foreign investment limits are not applied while Selected on average daily total market cap, annualised traded value and trading
exch) calculating the IWF for S&P BSE index constituents. frequency.
Top 400 are selected then buffer is 401 - 600
In most cases, Investable Weight Factors (IWFs) are reported to the nearest one
percentage point
IWF: Minimum control of 5% except India
Universe is 93% of BSE Mainboard
Fast entry of large companies - IPO must be among the top 10 companies, based
on a respective index’s construction ranking criteria. 5 days’ notice will be given
and the smallest company will be removed
Brazil Bovespa Index No capping Not mentioned in Concepts and Practices Manual Penny stocks excluded (shares with average weighted price of less than R$1 - one
(Ibovespa) Brazilian real)
Liquidity represents about 80% of market liquidity
Market Cap represents about 70% of all listed companies
Page 17 of 18
Country Index Capping Foreign companies Unique characteristics
China (Shenzen Stock SZSE Component Index The SZSE Component Index Series The Shanghai and Shenzhen exchanges do not however Only for A listed shares
Exchange) (not to be confused with don’t implement capping allow the listing of foreign companies. The HKEX does. Need to be listed for at least 6 months unless total and free float market cap
SZSE Composite Index methodology. comprehensively is within top 10 of all listed stocks.
which is an index of all Represents about 60% of the available market capitalization of Shenzhen equities
listed companies, same Fast entry: If a newly eligible or new company's daily average total market cap
ground rules but 500 and free float market cap is within top 10 in the market for the first 5 days, it will
companies) be added and the smallest company deleted.
Constituents can be removed between reviews due to corporate actions,
suspensions, termination or if SSI feels it is no longer a viable constituent
China (Shanghai Stock Shanghai Stock No capping The Shanghai and Shenzhen exchanges do not however Tracks all listed A and B shares.
Exchange) Exchange Composite allow the listing of foreign companies. The HKEX does. Minimum market cap: total share capital of more than RMB (renminbi) 50 million.
Index (very volatile)
There is SSE 180 which
is a continuation of
SSE30, this selects the
top 180 constituents by
full market cap,
negotiable market cap
ratio, trading values and
turnover ratio
Australia All Ordinaries Index No capping IWF is based on total securities held on the Australian Market capitalisation is the only eligibility requirement of constituents, as liquidity
(XAO) register is not considered, with the exception of foreign domiciled companies.
Australia S&P/ASX 200 15% IWF is based on total securities held on the Australian Fast entry: 8 weeks trading volume and only if a vacancy exists due to deletion
register
Page 18 of 18
Date: 14/12/2018 05:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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information disseminated through SENS.