On September 20, the Dax , the main reference on the Frankfurt Stock Exchange, will grow from 30 to 40 values . It is the first major revision undertaken by the index since its creation in 1988 with the aim of increasing its quality and being more representative of the German economy.
With the new additions, the selective will maintain its cyclical nature while slightly increasing its exposure to defensive and growth stocks. With this deconcentration, the German indicator will join the French Cac and the Italian Footsie , which also have 40 members, and reopens a recurring debate about what would happen if the Ibex expanded its composition to be on a par with its European peers.
Some limitations that are being reflected in the returns that the stock markets are offering in 2021, with the Spanish adding 8.7% compared to 16.6% of the Ftse Mib or almost 20% of the Cac.
Would it be a more competitive selective? The majority of analysts and managers surveyed by elEconomista think so. Of the 10 analysis houses consulted, nine experts think that the national indicator would be a better index. “A bigger index should suppose some diversification to it,” says Gonzalo Sánchez, investment director at Gesconsult. Furthermore, as has happened to Dax, “an index with 40 stocks would allow it to be better diversified and not have as much weight from cyclical companies,” adds Sergio Ávila, from IG.
Tradition: “The universe on which this index was created in 1992 has nothing to do with today”
Experts also allude to the need to increase the number of securities due to the clear bias towards banks and utilities . “That does not seem like an adequate diversification for a national index,” says José María Díaz Vallejo, co-manager of Rentamarkets.
On the contrary, only one house, Imantia, defends that “expanding the composition of the Ibex does not have to improve the index per se”, highlights its manager Jaime Espejos.
The volume, a stumbling block
But putting theory aside, these experts are aware that “due to the size of the Spanish listed companies, it would not have a great impact on the final composition,” admits Jorge Lage, analyst at CM Capital Markets. The reason is that “on a practical level, the new incorporations would have a very small weight”, laments Susana Felpeto, from atl Capital.
Unlike the Dax, where the choice will no longer be influenced only by trading volume, but above all by capitalization, it is not just a question of size.
“With the Ibex 35 weighting system, by capitalization and free float , changes in the number of securities do not correct these problems,” admits Gonzalo Lardiés, fund manager at Andbank.
The committee that reviews the Ibex seeks to group the securities with more liquidity, with a higher trading volume. But they also take into account that they have a minimum capitalization, with the exception that only securities that circulate freely on the stock market and are not in the hands of shareholders through large packages are taken into account. Thus, the five best positioned firms to join a hypothetical Ibex 40 would be Rovi, Logista, Catalana Occidente or Ebro Foods, together with Sacyr or Mediaset , which with a weighting of 0.28% and 0.29%, respectively, are close to the 0.30% minimum required.
Andbank: “In the Ibex it would be even more necessary than in the Dax because there is a great concentration”
Other values would also have options. “By market capitalization today, companies such as Ebro Foods would enter, which would expand the universe of food companies; or the industrial one with Zardoya and Vidrala, giving rise to defensive and growth values,” says Jaime Tassara, from Tradition.
For Juan José Fernández-Figares, from Link Securities, “the real problem is that the number of listed companies is very small and there are many sectors, important for the Spanish economy, underrepresented.” In this sense, “there are large companies in Spain (Mercadona, El Corte Inglés, etc.), but they are not listed on the stock market,” recalls José Luis Herrera, an analyst at BiG.
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