Standard & Poor’s Index Services (S&P) and the Australian Securities Exchange (ASX) today announced, after consulting the market, that Foreign Exempt companies listed on ASX will be eligible for index inclusion, effective 1 September 2008.
Under this change, Foreign Exempt companies listed on ASX will now be eligible for index inclusion, provided the primary listing of the stock is on a major exchange within a developed market. Foreign Exempt companies will still be required to meet all the standard index inclusion criteria in the S&P Index methodology such as capitalisation and liquidity thresholds.
Current index methodology extends index eligibility to Foreign Domiciled companies, but Foreign Exempt companies (which are a sub-category of Foreign Domicile companies) are not eligible. The ineligibility of Foreign Exempt companies – due to previously held concerns about the nature and timing of disclosure of corporate actions – is an anomaly for companies listed on exchanges in developed markets whose disclosure requirements for corporate actions are broadly comparable with those of ASX.
Foreign Exempt companies currently listed on ASX, and which may be eligible for future index inclusion includes, Alcoa Inc (AAI), Anglogold Ashanti Ltd (AGG), Constellation Brands Inc (CBR), Coca-Cola Hellenic Bottling Company S.A. (CHB), and Newmont Mining Corporation (NEM).
While the change is not expected to have an immediate impact on the index constituency, it will create a more favourable environment for the listing of international companies in Australia, and give Australian investors access to broader investment opportunities in the local market.
S&P’s Associate Director Simon Karaban said, “This is a positive step toward ensuring that Australia’s benchmark equity market indices reflect the increasing globalisation of the Australian market. The end result is more representative indices which better meet the needs of index users.”
ASX General Manager Equity Markets, Richard Murphy, said, “This change removes a key impediment to large international listings on ASX. Australian fund managers, investment banks, brokers and ASX all have a strong interest in growing the international side of ASX-listed equities so that our market keeps pace with the growth in Australian superannuation.”
More information on the amended index methodology reflecting the change can be found at www.standardandpoors.com/au/indices