Richemont drastically down weighted in local ETFs
Big changes in the Top40 ad Indi25 ETFs at the close on Thursday 15 June 2023 as Richemonth is down weighted.
Richemont used to trade is South Africa as depository receipts and recently they cancelled this in favour of an inward listing. There was no change expect for a 10:1 consolidation that saw your holding decrease by a factor of ten and the share price increase by a factor of ten.
However one big issue was that as it is now inward listed share and only the shares held on the local register are used when calculating the weighting in an index. With most of the shares held via the primary Switzerland listing this means a lot less weight in local indices.
So when the local indices are rebalanced at close of trade this Thursday Richemont will have a smaller exposure in the Top40 and Indi25 indices and the corresponding ETFs.
The reduces China exposure (as we wrote about in the beginning of this year) as Richemont gets a lot of sales in China and overall the Top40 was over 40% exposed to China directly and indirectly.
It also means a lot less exposure to luxury and more exposure to mining and Naspers (and as such Tencent).
New weighing in the two indices are as below (source Siyabulela Nomoyi from Satrix).
New Top40 weighting effective close 15 June 2023.
Top 5 weighting in the Top40 is now down from 50.7% to 37.6% which is a big shift as well.
New Indi25 weighting effective close 15 June 2023.
This shift in weightings is unusual due to the changed nature of the Richemonth listing and will see issuers selling a ton of the stock while buying a lot of the others. This will incur extra one-off fees and could induce some tracking error into the ETFs.
That said I am not stressed, stuff happens and I am totally happy with my Top40 ETF holding.
Simon Brown
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.