The Index Will Comprise the 30 Largest Companies that Listed in Recent Years
The Market Cap of the New Index is NIS 80 Billion and Its Composition Yield – 12.4% Since the Beginning of the Year
Tel Aviv, March 22, 2022 – The Board of Directors of The Tel-Aviv Stock Exchange (TASE:TASE) approved the launch of a new index – TA-NewTop30 Index, which will comprise the 30 largest companies that listed on TASE in the past five years, across all sectors.
In the past year, close to 100 new companies were listed, mostly IPOs, more than the total number of companies that listed in the preceding decade, including 2 dual listed companies. In view of the large volumes of IPOs, TASE will be launching an innovative index that will reflect the financial performance of the major issuers in recent years.
The index will serve as a new investment instrument that enables dispersed investment in new companies, which holds numerous benefits. Among others, the index will be used as a complementary instrument for participation in offerings, enabling the public to invest in the new companies, while dispersing the risk that is involved in such investments.
Furthermore, it should be noted that last year TASE has instituted a new base price calculation method. This improved measurement of companies’ IPO performance is effective from day one of the IPO and takes into consideration the structure of the IPO package. The common “book building IPO” method does not leave sufficient holdings for the public, which the new index will enable.
A recent publication by TASE’s Research Unit shows that institutional investors investing for the long term are the principal buyers in IPOs. Through the new index, the public and short-term investors, mutual funds and portfolio managers, will be able to invest in IPOs. Moreover, in the absence of Analyst reports for many of the new companies is a deterrent for investors. The new index reduces the risk of investment in an IPO.
Over the past two years TASE has launched several new bond indices and equity indices, as part of its policy to expand the range of products and to make adjustments and innovations to meet the investors’ needs.
Characteristics of the index – Presented below are the characteristics of the index, based on the simulation performed on March 22nd, 2022 (attached as an appendix):
- Number of shares expected to be included in the index – 30.
- Market cap – approximately NIS 80 billion.
- Public float value – approximately NIS 36 billion.
- Composition yield of the index since the beginning of the year – 12.4%.
Multiple sectors are represented in the index, including: Commerce and Services (21% of the index’s market cap), Technology (22%), Energy Oil & Gas (17%), Financial Services (18%) and more.
The challenge – stability alongside turnover – how to ensure that the index reflects new shares at all times?
The main challenge in the development of an index that is designed to reflect shares of new public companies is deciding on when to replace them with newer shares. Experience shows that a high turnover rate could adversely affect the yield and deter investors. Nevertheless, we need the index to truly reflect new shares and not stagnate.
Therefore, TASE has determined that the index will include shares of companies with a tenure of up to 5 years as public companies, at the end of which they will be removed from the index.
In addition, to prepare for the possibility of a reduced IPO volume, it is proposed that, at any given time, the index population will not be less than 20 shares, i.e., if the number of shares drops to 20, no share would be removed from the index until another share joins it.
The base index of the index on its launch date will be identical to the base index of the TA-Rimon Index on that date. The index will be calculated based on a gross total return index formula.
The launch date of the index will be determined at a later date, as technical preparations are concluded.
Breakdown by sectors and composition of the index- based on the simulation performed on March 22nd, 2022 (attached as an appendix):
|No.||Share||Year Joined TASE||Market cap in NIS millions||Weight|
|9||NAVITAS PTRO PU||2017||1,860||5.00%|
|15||ALTSHU FUND PEN||2019||2,689||3.51%|