ASX media release - Information Package on Restructured All Ordinaries Index
2 September 1999
Following extensive consultation, Australian Stock Exchange ("ASX") today released an information brochure outlining the restructure of the All Ordinaries Index.
"To better meet the differing demands of users of today’s market place we will be restructuring some of the existing indices, including the All Ordinaries Index and introducing some new indices," ASX’s National Manager Market Data, John Ying, said today.
"The original All Ordinaries Index was created twenty years ago as a simple way of measuring market movement. It was not designed as an instrument against which to measure portfolio or individual stock performance. The market has changed significantly since then.
Mr Ying said that the revised All Ordinaries Index is predominantly a measure of price performance of the market.
"So as to more accurately reflect market movement, it will be expanded to 500 companies. It will include some companies with market capitalisation as low as $37 million. It will account for about 99% of total market value, and will be fully weighted by market capitalisation," he said.
"The existing liquidity requirements will be removed as these are far more appropriate to benchmark indices.
"The revamped All Ordinaries Index will provide market participants with a more dynamic, accurate and comprehensive indicator of market movement."
ASX will continue to focus on industry groups by maintaining the existing 24 industry sectors.
In order to address the issue of performance or benchmarking ASX will introduce six Benchmark Indices specifically designed to meet the needs of Fund Managers. These are:
Each index has a limit on the number of companies that can be included. The existing 20 and 50 leaders will become the ASX20 and ASX50. The ASX100 will continue with the new rules applied.
The new indices are the ASX200 and ASX300. The Small Ordinaries will become the ASX300, excluding companies contained in the ASX100.
"The rationale behind the new package of benchmark indices is to increase the choices available and to offer the industry the opportunity to mix and match as required," said Mr Ying.
"The choice of indices allows Trustees to select whichever benchmark is a better fit for their investment strategy and portfolio structure.
The new index package will be implemented on April 3rd 2000 to allow sufficient time for market participants to review their investment mandates and make any required changes to their systems.
"We will be using the closing price from the old All Ordinaries Index on 30 March 2000 as the base for the new All Ordinaries Index to ensure a seamless transition on 3 April 2000."
ASX will continue to provide the new All Ordinaries Index and the Benchmark indices in accumulation index formats that will be calculated at the end of each trading day. Given the importance of historical data, all of the indices will be calculated retrospectively, initially from 1992.
ASX has today begun an ongoing information campaign to the investment community prior to the launch of the indices on April 3rd 2000 and released an information brochure about the index restructure.