FTSE Launches Currency Family
In September, FTSE launched a new family of currency indexes, the FTSE Currency Forward Rate Bias (FRB) Index Series. The first indexes in the series to debut were jointly developed by FTSE and currency overlay firm Record Currency Management.
The FTSE Currency FRB5 indexes cover the 10 currency pairs that can be formed from the U.S. dollar, euro, Japanese yen, pound sterling and Swiss franc. Each index seeks to represent the performance of the carry trade (or forward-rate bias strategy), tracking the performance of the higher-interest currency against the lower-interest currency in the pair via one-month-forward contracts. The indexes are denominated in all five currencies covered by the FTSE FRB family. They are rebalanced monthly.
Deutsche Boerse Launches Global Sector Indexes
ETFExpress reported that Deutsche Boerse launched four global sector indexes. The indexes are extremely narrow, each featuring just the largest 10 components in their respective sectors. The new additions include the DAXglobal Coal, DAXglobal Gold Miners, DAXglobal Shipping and DAXglobal Steel indexes. The gold miners and steel indexes both require that components derive at least 50 percent of their revenues from their target industries. Component weights are capped at 15 percent.
Dow Jones Adds High-Yield Infrastructure Index
Dow Jones Indexes’ partnership with Brookfield Asset Management has expanded, with the launch of the Dow Jones Brookfield Global Infrastructure Composite Yield Index in early November. The two companies originally fielded a complete family of global infrastructure indexes in 2008, and the newest addition is derived from the broad composite index of that family.
The new high-yield index represents the top 70 percent of the components of the Dow Jones Brookfield Global Infrastructure Composite Index in terms of annual yield, with each component capped at a 10 percent weighting.
DJ Announces 2010 Weights For DJ-UBS Commodity Index
At the end of October, Dow Jones Indexes announced the new weights for the DJ-UBS Commodity Index (DJ-UBSCI), effective January 2010. The top five component commodities are fairly similar to what they were in 2009, but with different weightings: crude oil, 14.34 percent; natural gas, 11.55 percent; gold, 9.12 percent; soybeans, 7.91 percent; and copper, 7.64 percent.
Last year, the target weights for the index were as follows: crude oil, 13.75 percent; natural gas, 11.89 percent; gold, 7.86 percent; soybeans, 7.59 percent; and corn, 5.72 percent. The weights are set based on liquidity and production data, but also consider diversification and minimum weighting requirements. Of the top five, it’s clear that the largest changes have been in the weightings of gold and of copper, which displaced corn.
Although 23 commodities contracts are eligible for inclusion in the broad commodity index (and each has their own calculated subindex), only 19 of those contracts are currently assigned weightings in the DJ-UBSCI.
MSCI Completes Semiannual Review
MSCI completed the semiannual review of its global equity index family in November. The biggest outcome? Increased exposure to BRIC economies.
Surging growth in Brazil and China led to significant company additions from those markets.
All in all, 11 Brazilian companies and seven Chinese companies were added, while only one Chinese company was purged from the indexes. Topping the list of additions were Brazil’s retailer Loja Renner and PDG Realty, as well as China-based Nine Dragons Paper.
Strong overseas growth also helped a wide array of small-cap companies satisfy the market-cap requirements to be added to MSCI’s global benchmarks. The broad-market Global Small Cap Indexes added 362 securities during this rebalancing and deleted 165.
Among them, the largest additions to the World Small Cap Index were U.S.-based FTI Consulting and Aqua America, as well as U.K.-based Ladbrokes.
The changes reflect the growing strength of emerging markets and recent outperformance by small-cap names.
DJI Launches Islamic Index For China
Investors interested in investing according to the dictates of Islam now have a benchmark that covers China. The Dow Jones Islamic Market Greater China Index tracks companies based in Hong Kong, Taiwan and mainland China, and applies Dow Jones’ methodology for screening out stocks that are not Shariah compliant.
Individual component weights in the greater China index are capped at 10 percent of the index, and Taiwan’s weight specifically is capped at 30 percent of the index. At launch, the index comprised 290 components; the top five included China Mobile Ltd., China Unicom (Hong Kong) Ltd., CNOOC Ltd., Hon Hai Precision Industry Co. Ltd. and Taiwan Semiconductor Manufacturing Co. Ltd.
Use of the new index as a benchmark has already been granted via license to Malaysia-based Prudential Fund Management Berhad, which originally approached Dow Jones about designing the index.
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