Talking Technicals
GARTH MACKENZIE: Weighing in on weightings
A few large companies have significant pull on the performance of the JSE top 40 index
The weightings of various shares on the JSE indices are important in terms of how an index performs. This has been abundantly clear on the top 40 index in the first few months of the year. The top 40 index is a free float* market capitalisation weighted index of large-cap stocks on the JSE. The weightings of the top 40 are heavily skewed to a few really large companies, and these companies have a significant pull on the performance of the index. Since the start of the year, the two largest companies by weight on the top 40 have performed exceptionally, and this has helped to lift the overall index. A table illustrating the weightings of the 10 largest stocks on the top 40 index is shown, along with the year-to-date performance of those stocks. Notice how Naspers and Richemont have performed extremely well, with gains of 32% and 25% for the year to date. These are also the stocks with the heaviest weightings on the index. Together they make up about one-third of the weighting of the ...
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