Standard & Poor’s new global index may not be the first worldwide equity index, but the company is convinced this attempt to export the formula for its successful S&P 500 US stocks index will be a winner.
The new index, called the S&P Global 1200, is based on the S&P 500 and six other regional blue-chip indices all launched within the last year.
The S&P United Kingdom 150 and the Japanese S&P/TOPIX 150 index were the last two regional sub-indices to be launched. They completed the line-up, joining the S&P Latin America 40, the S&P Euro Plus, the S&P/TSE 60 (Canada) and the S&P Asia Pacific 100 to form the S&P Global 1200. The companies included in the global index account for about 70% of the world equity market capitalisation, S&P says.
The index, it says, aims to provide investors with an investable portfolio benchmark. It takes account of restrictions on ownership and large holdings by individual investors, by means of an investable weight factor – this is the proportion of a company’s market capitalisation effectively open to global investors.
Each of the components has been chosen to keep an appropriate sectoral balance in the region, S&P says.
The index will be the first global benchmark to be calculated real-time. From October 25, real-time data on the index will be published from the opening of the Tokyo market to the close of New York.
Real-time pricing is necessary for index futures and exchange-traded funds. The company is clearly keen for investment products such as these, and index funds, to be based on the Global 1200. Jacqueline Meziani, director of global business development at S&P, says there are many agreements with exchanges on products in the pipeline though none has yet been signed. But products have already been launched based on various components of the 1200, with S&P Euro Plus futures soon to be listed in Spain.
S&P is already involved in producing a world index, as a partner in the FT/S&P Actuaries World Indices. There could now be a question mark over that relationship, which some say is in a state of transition. Though the FT/S&P Actuaries World Indices are seen mainly as longer-term benchmarks, S&P intends its Global 1200 to be used for that purpose as well.
The Global 1200 index, says S&P, while broad enough to provide good representation across 29 countries, also has good liquidity in the underlying constituents – essential for derivative and index fund use. “You have to be in the middle to get the best of both worlds,” says Meziani.