MSCI free float will see European weightings fall
EUROPE - The weighting of most European countries will decrease under MSCI’s provisional world free float index, MSCI Provisional ACWI Free Index, compared to its standard ACWI index.
Only the UK, Ireland and Finland gain weight in the proxy index that will be followed by the introduction of a free float index, MSCI Enhanced Methodology, in May next year.
The adjustment of the index raises the US weighting, from 49.06% to well over half (55.3%) of the total in the free float index, at the expense of the rest of the world.
The weighting of the UK market increases by 1.06 percentage points to 10.38%, whereas Ireland and Finland only increase slightly, by 0.04 and 0.02 percentage points to 0.34% and 1% respectively.
Japan, France, Germany and Spain weigh a lot less in the adjusted, provisional index: Japan is down to 9.38% from 10.71%, France slims down to 3.77% from 4.94%, Germany’s weight drops more than a quarter (0.95 percentage points) down to 2.76%, and Italy is down to 1.47% from 2.02%.
After adjusting for free float, Switzerland moves ahead of Germany on the European list to third place, Sweden is overtaken by Finland and Ireland leaves behind both Belgium and Denmark.
Worldwide, the top weight gainers among industry sectors are technology hardware and equipment, diversified financials, energy, health care equipment and services, and pharmaceuticals and biotechnology. Weight decreases are seen in telecommunication services, automobiles and components, banks, materials, and consumer durables and apparel.
Free float will be introduced in MSCI’s standard indexes in two phases, on November 30, 2001 and May 31, 2002, and the proxy will be in place for a year, starting on May 31 this year.
Market capital represented by the provisional index (US$18.2bn) will be lower than the total market capitalisation of the standard index (US$18.8bn), but the number of securities will increase from 2,066 to 2,258.
This is because the new index represents 85% of free float adjusted market capitalisation in each industry group and in 49 equity markets, compared to the 60% of all market capitalisation mirrored in the index provider’s standard index.