All Ords Dead, Long Live New Share Index
Sun Herald
Sunday April 2, 2000
THE sharemarket's All Ordinaries index was declared dead on Friday. Not the victim of the mother of share crashes, but because it will be replaced tomorrow by a range of five new share price indexes.
What's in a name? $4 million, says Tony Ho, chief financial officer with Yates, the gardening company.
That's the cost of an 8 per cent drop in Yates shares since the changes were announced last month.
As big investment institutions adjusted their holdings to reflect a smaller 200 companies index, Yates missed out.
``Obviously, fund managers driven by the new index would get out of our shares, and that's annoying," Mr Ho said.
On Friday Brierley Investments plunged 19pc as investors got out on its exclusion from the top 100 stocks index.
The curtain fell, after 20 years, on the venerable All Ords, the performance indicator of the 249 largest companies among the 1200 listed on the Australian Stock Exchange (ASX).
With the exchange's privatisation, the All Ords benchmark has been sold to the US rating agency Standard and Poor's.
Behind the change was a major bunfight which erupted when the ASX tried to slip through changes to the All Ords without the consultation that investors and companies wanted.
``Five years ago no-one was interested in the index now everyone is using it as a benchmark to measure the performance of investment managers," ASX index services manager John Elsverson said.
Yates and Freedom Furniture were among 20 companies which reached for their lawyers, fearing for their share price on being tipped out of a smaller, new benchmark All Ords.
The ASX and big financial institutions wanted a slimmed down All Ords, but after the fracas everybody got something there are the S&P/ASX20, 50, 100, 200 and 300 indexes as well as the new All Ords covering 500 stocks.
The burning question is which will become the main benchmark for the market S&P and the ASX want the 200, but other investment fund managers want to use the 300.
The decision will largely be made for them by the Sydney Futures Exchange, now locked in negotiations with S&P, which has increased tenfold some fees for using the index.
The changeover also has seen the entry of new stocks, especially booming high-tech companies, such as Davnet, Keycorp and Melbourne IT. A small 200 index plus the new stocks will push Yates and a clutch of traditional companies out of the index, such as Harris Scarfe Holdings Ltd, Prime Television and Washington H Soul Pattinson.
Besides meaning less demand for shares from large institutions which want to cover the stocks on the S&P/ASX 100 or 200 index, exclusion can affect companies' ability to raise money.
HSBC equity analyst John Banos said information technology companies comprised a third of the US S&P index, compared with less than 3pc of the S&P/ASX200.
© 2000 Sun Herald
Share This