AEX rebalance cuts heavyweights down to size
Significant changes were made to the Amsterdam Exchanges Index at the beginning of March, though market reaction to the rebalancing was muted.
All constituents of the AEX had their weights adjusted for free-float levels and index weights of individual constituents were capped at 10%. The composition of the index also changed. Corus and Vendex were taken out of the index altogether.
Large stocks affected by the new 10% cap rule were those ING Groep, whose weight declined from its previous AEX weight of 15.57% to 10%, and Royal Dutch Petrol, where the weight was reduced from 12.73% to 10 %.
Stocks whose weights were cut by around a third, largely because they have limited capital that floats freely, were Heineken, Utd Pan-Europe Com 1 euro ‘a’ shares and Gucci Group. The weights of Telecom. Aegon, Fortis, Kon KPN and TNT Post Groep stayed virtually the same – though their weights were theoretically reduced by 25 % due to the free-float rule, the rebalancing resulting from the exit of other stocks from the index cancelled this out.
Most other stocks in the benchmark increased their weight by around a third.
A week after the changes, though some stocks had made significant changes due to stock-specific factors, the index adjustment had little noticeable impact on beyond the few days surrounding the move. “There was not a huge amount of reaction to the changes in the AEX,” says Dan Fox, senior analyst at Commerzbank.