Dow Jones Indexes has launched the Dow Jones Global Titans Index, a list of the world's top 50 inter...
Dow Jones Indexes has launched the Dow Jones Global Titans Index, a list of the world's top 50 international companies.
To form the index, the top 100 stocks by market cap were taken from the Dow Jones Global Indexes. Each company was then ranked according to asset value, book value, sales/revenue and net profit. These were combined with market cap rank and this, plus foreign sales ranking, was used to determine the final list. The index will be reviewed annually.
"Global Titan's are companies that will dominate the world's economy well into the twenty-first century," said Michael Petronella, managing director of Dow Jones Indexes. "With no national borders to define their territories, they defy traditional asset categories. Investment professionals now have a way to measure and track them.
Dhaval Joshi, Flemings investment manager, said: "If you think of the three economic blocks North America, Asia and Europe there are increasing numbers of companies with earnings streams based on two or three of them.
"BP Amoco, for example, could be quoted anywhere in the world. It is not a British company in the traditional sense of the word.
Adrian Tupper, senior quantitative analyst for HSBC, said: "BP Amoco is nominally a UK company, but it naturally has a lot of US exposure. So when I invest in BP Amoco, am I investing a large portion in the US and other areas? As it stands, the index market doesn't really tackle these problems.
Another problem for investors when large companies begin to dominate regional exchanges is that clients often demand fairly tight investment restrictions.
If an investor is not allowed to hold more than 5% of his portfolio in any one company and BP Amoco occupies 5% of the benchmark, they simply cannot go overweight in that company, no matter how positively that would affect performance.
Joshi noted that there is no historic data available for the Global Titans Index, only backward extrapolations of the current constituents. Analysts would, in effect, be starting from scratch.
Tupper thinks another problem for the index will be persuading the large, conservative, institutional investors to switch to the new index from the MSCI World Index, which is probably the most current popular global index.
He said: "Any novel index is a good thing to have and it's certainly interesting as an intellectual exercise, but it's probably ahead of its time.
The Dow Jones Global Titans Index is listed daily in the Wall Street Journal. Its average daily share volume is greater than five million and the daily dollar volume averages over $334m. Companies listed include Microsoft, General Electric, IBM, Wal-Mart, Exxon, AT&T, BP Amoco, Intel, BT and Deutsche Telekom.
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