S&P

S&P Launches Global Sector Indexes in Australia

S&P

Standard & Poor's (S&P) will begin live dissemination of real-time global sector indexes in Australia on June 25. S&P will launch 12 sector indexes from the broad Australia S&P/ASX 200 index, which covers approximately 89% of the total market capitalization of the Australian market.

Sector index Percentage of S&P/ASX 200
Energy
2.60%
Materials
15.07%
Industrials
6.74 %
Consumer Discretionary
16.52%
Consumer Staples
7.11%
Health Care
3.03%
Financials
36.87%
Information Technology
0.89%
Telecommunication Services
9.88%
Utilities
1.29%
Financials-ex Property Trusts
31.34%
Property Trust
5.53%

Source: Standard & Poor's

The new Australia sector indexes are designed around the Global Industry Classification Standard (GICS), which organizes over 15,000 global companies into 10 economic sectors. S&P and MSCI collaborated on GICS with the goal of reducing investor confusion "by classifying companies around the world with a consistent standard according to its line of business," said Jason Feldmayer of S&P.

The launch underscores the continuing trend towards global sector-based investing and analysis, and the demand for liquid and transparent global sector indexes. Some of the factors that are driving global sector investing include global deregulation, the increased cross-listing of stocks across countries, and more homogenization in the Eurozone.

"S&P's GICS indexes are modular tools that fill up the complete opportunity set for global sectors," said Binu George, international equity investment strategist at Barclays Global Investors (BGI). "The transparency of the indexes also prevents overlap and allows investors to avoid unnecessary risk."

George also noted that BGI will launch iShares exchange-traded funds based on S&P global sector indexes in the coming year.

S&P launched 12 sector indexes in Australia because a separate property trust sector index needs to be maintained for the Australian home market. For the purposes of GICS, Financials-ex Property Trusts and Property Trusts are combined to make up the GICS Financials sector.

Odds and ends

  • To learn more about the methodology for GICS, click here.
  • To read an interview with MSCI about the development of GICS, click here.
  • To check out a summary of an important Barclays Global Investors report on international equity benchmark selection, click here.