S&PDJI bolsters South Africa factor-based index range

S&P Dow Jones Indices (S&P DJI) has expanded its South Africa range with the S&P Quality South Africa Index, a new index designed to track high-quality stocks in the South African equity market.

The S&P Quality South Africa Index is comprised of the top 20% of stocks from the S&P South Africa Composite Index which are selected using a “high quality score” that is calculated based on three fundamental measures – return on equity, accruals ratio and financial leverage ratio. Each stock in the S&P Quality South Africa Index is weighted by its quality score and multiplied by its float-adjusted market capitalisation.

The index has been licensed to Satrix, a domestic provider of passive investments in South Africa, for the development of a unit trust, but there are no structured products providers lined up yet to deploy the new benchmark.

Zack Bezuidenhoudt, head of sub-Saharan Africa at S&P Dow Jones Indices, said that the structured retail market in South Africa is small compared with other global markets but is growing.

“In the institutional space, we have had interest for our S&P GIVI South Africa 50 indices and we can see that our factor-based indices such as the S&P Quality South Africa and S&P Momentum South Africa indices will also be of interest,” he said. “Factor-based indices will definitely be very important to our business in South Africa and Africa as a whole – we already have the largest range of indices for the region and we are well placed to meet the demand for these indices. ”

The S&P Quality South Africa Index joins S&P’s family of factor-based indices in the country which includes the S&P Low Volatility South Africa Index; the S&P Dividend Aristocrats South Africa Index; the S&P Momentum South Africa Index; the S&P Equal Weight South Africa 50 Index; and the S&P GIVI South Africa Index family which has five sub-indices (composite, financials, industrials, resources and large/mid-caps).