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Hanging in the rebalance: What to expect for FTSE GEIS in March

At the open of March 18, 2019, FTSE Russell’s semiannual rebalance of its flagship global equity indexes, the FTSE Global Equity Index Series (FTSE GEIS) and derived indexes, including the well- known FTSE All-World® Index, will take effect.

During this rules-based process, the entire index serieswhich includes over 16,000 large, mid, small, and micro cap securities from 49 developed and emerging countrieswill be refreshed to reflect changes that have occurred to the global equity landscape since the last rebalance.

Adjustments scheduled to be made during the March 2019 semi-annual rebalance will include (but are not limited to):

Implementation of previously-announced country classification changes:

The first tranche out of five scheduled for Saudi Arabia’s reclassification as Secondary Emerging, which was announced in March 2018, will take effect this month, adding an expected 166 names to the FTSE Emerging Index.

As announced in September 2018, China A Shares will be classified as Secondary Emerging in June of this year.[1] In advance of this event, at the March 2019 rebalance, China was reviewed as its own regionseparate from the Asia Pacific ex Japan regiondue to the size and impact that the mainland Chinese market would have on other companies in the Asia Pacific ex Japan region.

Adjustments to the market capitalization thresholds that determine the makeup of the large, mid, small, and micro cap segments of FTSE GEIS:

Leading up to each semiannual rebalance, FTSE Russell utilizes data as of the cutoff date—in this case, December 31, 2018—to calculate and make available to the public regional inclusion levels. A comparison of the inclusion levels scheduled to be applied as of March 18, 2019 to those applied during the last semi-annual rebalance (September 2018) indicate a downward shift in the size of the thresholds between the large and small cap market segments across all eight regional components of FTSE GEIS, with the exception of the Latin America and Middle East & Africa regions.

Latin America’s increased size threshold is attributable to Brazil’s recent performance (up 31.4% since the September 2018 review[2]) and the fact that Brazil represents nearly 60% of the weight of FTSE GEIS’s Latin America regional component.

The introduction of Saudi Arabia to the Middle East & Africa region contributed to the increase in size of this region’s thresholds.

The semi-annual FTSE GEIS index rebalance is an important part of realigning the indexes to ensure that they continue to accurately reflect the global equity markets by implementing scheduled country classification changes and updates to index membership, market capitalization and float. 

To learn more about FTSE Russell’s semi-annual review process, please join our post-review webinar on March 19 for a discussion about the global equity market landscape via a summary of trends observed and changes captured during the March 2019 global equity index review.

 

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[1] http://www.ftse.com/products/downloads/FTSE_FAQ_Document_China_A.pdf
[2] Source: FTSE Russell, FTSE Brazil All Cap Total Return (USD) from September 24, 2019 through March 11, 2019

 

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