BM&FBOVESPA Launches Small Cap And MidLarge Cap Indices

Indices measure the performance of stocks separately by market capitalization


Two new indicators will be introduced on the Brazilian stock market as of September 1, 2008: the BM&FBOVESPA MidLarge Cap Index and the BM&FBOVESPA Small Cap Index. Their portfolios will measure the return of stocks by market value. Under the tickers MLCX and SMLL, respectively, the indices will have their portfolios reevaluated at the end of each four-month period.

The creation of the MLCX and SMLL indices meets the demand of the market for an official reference that uses market capitalization as the basic criterion for segmenting portfolios. The IBrX 50 index, by comparison, initially segregates a portfolio of 50 stocks with the highest negotiability indices and an 80% trading session presence in the preceding twelve months, and then weighs the participation of the portfolio according to the market value of the outstanding shares (free float).

The BM&FBOVESPA MidLarge Cap and BM&FBOVESPA Small Cap indices were elaborated in accordance with international standards, allowing them to serve as a reference for investors and portfolio managers.

Eligible Stocks

Companies that together represent 85% of the Exchange’s total market value are eligible to participate in the MidLarge Cap Index. The remaining companies that are not included in this group are eligible to participate in the Small Cap Index. Companies that are issuers of Brazilian Depository Receipts (BDRs) or those which are under judicial reorganization or bankruptcy cannot be included in either Index.

Inclusion criteria

After being segmented by market value, the stocks that are eligible to participate in the indices must meet the criteria for inclusion in a list of stocks whose negotiability indices added together represent 98% of the total value of all individual negotiability indices. These stocks must also have had a 100% trading presence measured in the twelve months preceding the portfolio’s validity date. The same company can have more than one type of stock included in the portfolio, as long as each stock type separately meets the inclusion criteria.

Companies with less than twelve months of listing will be eligible if they have a 100% trading session presence measured in the six months preceding the analysis.

Exclusion criteria

A stock will be excluded from the portfolio, during the periodical reevaluations, if it no longer meets all of the inclusion criteria. If, during the life cycle of the portfolio, the issuing company enters a regime of judicial reorganization or files for bankruptcy, its shares will be excluded from the index portfolio. In such cases, the necessary adjustments will be made to ensure the continuity of the index.

Weighing Criterion

Securities will be weighed according to the market value of the outstanding shares (free float) excluding the securities held by the controlling group, the securities held by company directors, the securities held by the company’s treasury and the special-class preferred securities that are non-transferable. The bases for the MLCX and SMLL indices have been set at 1,000 points for the date of April 30, 2008.