Upcoming changes to the IBEX 35 index methodology shake up the Spanish stock market
Madrid, July 30, 2023
The announcement by the technical advisory committee of the IBEX 35 index has sent shockwaves through the Spanish stock market. The committee has proposed a series of changes to the index methodology that would see the inclusion of new companies and the exclusion of some long-standing members.Key changes proposed
The most significant change proposed is the increase in the number of constituents in the index from 35 to 40. This would allow for a greater representation of the Spanish stock market and would better reflect the growing importance of smaller and mid-sized companies.Another important change is the introduction of a new free float requirement. Companies will now be required to have a minimum free float of 15% in order to be eligible for inclusion in the index. This is intended to ensure that the index is more representative of the tradable shares in the market.
The committee has also proposed a new rule that would limit the number of companies from any one sector to 25%. This is intended to ensure that the index is not dominated by any one sector and that it represents the broad diversity of the Spanish economy.
Impact on the market
The proposed changes have been met with mixed reactions from the market. Some investors have welcomed the changes, arguing that they will make the index more representative of the Spanish stock market. Others have expressed concern that the changes will lead to increased volatility and that some companies will be unfairly punished.The changes are expected to come into effect in September 2023. It remains to be seen how the market will react to the new methodology, but it is clear that the IBEX 35 index is set for a major shake-up.
Background
The IBEX 35 index is the benchmark index of the Spanish stock market. It is composed of the 35 most liquid and capitalized companies in Spain. The index is calculated and published by the Sociedad de Bolsas de España (SBE).The index was created in 1989 and has been revised several times since then. The most recent revision was in 2015, when the number of constituents was increased from 33 to 35.
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