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Impact Investing

IPE special report May 2018

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SMI review makes waves

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Swiss equities index SMI underwent one of its biggest ever changes when five new stocks were added to the benchmark. The change, which took place at the close of trade on Friday September 29, went as expected, says Commerzbank analyst Dan Fox.
In the run-up to the implementation of the review, Fox had pointed out that passive investor reaction might be more substantial than it had been in the past, due to the sheer scale of the change.
In the event, between Thursday and Friday, the new stocks outperformed the market by 5%, he says. “Serono was the best outperformer, but they all outperformed.”Apart from Serono ‘b’ shares, the new stocks are Richement b ‘a’, Kudelski B, JB ‘B’ and Unaxis Holding.
However, after their inclusion in the index, the stocks fell back, and by Monday they were cumulatively down 11% against the SMI, with Kudelski proving to be the weakest performer at that point, said Fox.
The waves seen in the Swiss market during the review phase were due to a combination of the big weight changes in the index and also the fact five new stocks were included, he said.
Part of the reason the provider altered the index was as an attempt to reduce the influence of the big names in the index. Novartis, Credit Suisse and UBS together made up between 50 and 60% of the index. Fox says at least to a certain extent the change has been effective, and a shift on this scale was unlikely to happen again soon.

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