Cross-holdings
are stakes held in one company by another. In terms of indices, they can create a
form of double-counting, if both companies are included in the same index, in that the
value of the holding in one company is reflected in the share price of the other.
Where significant cross-holdings
(say, 5-10 per cent or more) are known, it is FTSE's view that, as a matter of best
practice, the relevant proportion of the market value of the companies concerned should be
removed from the index. However, not all companies linked in this way are
constituents of the same inex. They would welcome views on whether they should
adjust all companies for cross-holdings, whether or not the holding company is a
constituent of the same index.
A cross-holding rule would
replace the existing UK subsidiaries rule, which excludes all companies in which another
constituent owns 50 per cent or more. This would enable the inclusion of companies
such as Cable & Wireless Communications, which was previously excluded under the
subsidiary rule.
|
However,
its index weighting would be adjusted to exclude the holding by Cable & Wireless, in
the UK series of indices.
Many investors also view
investment companies and trusts as double counting in the indices, where such companies
invest in equities which are also included in the indices. This issue is most
prevalent in the UK and FTSE therefore calculate their UK indices both including and
excluding investment trusts to give users a choice. However, not all investment
trusts (for example those which invest overseas) raise a double counting problem.
If you have any views and
comments on any of these issues, we would be pleased to receive them by email and relay them to FTSE International.
Back to
FTSE International Index |
