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The 19th of March 2018 will see the JSE Top 40 Cash Index (J200) rebalanced, as is the case on the third week of the last month in each quarter (March, June, September and December). Companies which are to be excluded from an index can often find some selling pressure manifesting before and after the rebalancing as funds tracking these indices rebalance as well. Inversely some buying of new inclusions into an index can also be a result of funds tracking the rebalance as well. The degree to which this may already occurred is uncertain.
It should be noted that IG’s South Africa 40 tradeable indices find their respective pricings from the underlying near dated Futures contracts of the All Share Top 40 index, with the cash product arrived at by a fair value adjustment on a daily basis.
New inclusions for the Top40 Cash Index
A strengthening rand has bode well for local retailers which have outperformed the broader market this year so far. As such, The Foschini Group, Truworths International Limited and The Spar Group will find inclusion in the Top 40 index at a ranking of 30, 31 and 35 respectively.
Also within the broader industrial sector, Imperial Holdings will find inclusion into the index at position number 33. Recent results have shown the group to have achieved record revenue and headline earnings per share growth of 16% in the 1H17.
Exclusions form the Top40 Cash Index
Listed Real Estate Investment Trust (REIT) companies have been under pressure this quarter with initial losses a contagion effect from the aggressive selloff seen on Resilient Property. This was initially due to speculation that sell side research house, Viceroy, may have been targeting the company in what was then an upcoming report. Resilient was not to be the outcome of the report, however the company’s results which followed left investors unappeased and questions remain around the company’s accounting practices. Resilient holds around 16% of Fortress Reit equity, and both companies have partnerships with broad-based black economic empowerment (B-BBEE) partner Siyakha Education Trust.
The declines in market capitalisation sees both Fortress REIT Ltd A (Fortress REIT B share) and Resilient Property to be excluded from the Top40 index to rankings of 45 and 55 respectively. Inward listing, Intu Properties, is another casualty of recent declines dropping to an index ranking of 55.
It should come as no surprise that global retailer Steinhoff International falls far out of the Top 40 Index to an exchange ranking of 77 following the realisation of irregular accounting practices within the group late last year.
The Top 40 companies in terms of inclusion into the rebalanced index is as follows: