What is the ASX Emerging Companies Index?

Submitted by Share Trading on 9 March, 2010 - 18:15

The S&P/ASX Emerging Companies Index

The S&P/ASX Emerging Companies Index is the premier benchmark to measure the performance of microcap stocks in the Australian Markets. The ASX Emerging Companies Index has a stock ticker code of XEC. The index provides investors with a tool to effectively analyze characteristics of the microcap segment of the market.

The S&P/ASX Emerging Companies Index complements existing larger capitalisation indices in the S&P/ASX index suite by providing an investable performance benchmark for companies that generally rank outside the S&P/ASX 300 by total capitalisation. The S&P/ASX Emerging Companies Index provides an opportunity-set of companies characterised as being smaller, often less liquid and under-researched when compared with companies traded on ASX with larger capitalisations.

The methodology developed by S&P and ASX for this Index has been designed to be representative of companies typically found in the small and microcap sector and resulting portfolios. The methodology:

  • Selects companies that generally reside outside the S&P/ASX 300. Companies ranked between 350 and 600 by total capitalisation are eligible for inclusion with the maximum number of constituents capped at 200.
  • Rebalances semi-annually rather than quarterly to reduce index turnover and associated transaction costs.
  • Allows high performing companies to be held until they migrate into the S&P/ASX 300. Companies are excluded at rebalance when they rank above 300 or below 650 by total capitalisation
  • Accounts for the low liquidity often found in this sector while still ensuring that the benchmark portfolio represents a viable opportunity-set for fund managers.

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