Wednesday, August 31, 22:00 hours. At that time, many Spaniards were groaning because vacations just ended, but Inditex was celebrating. Leaders of the Stoxx recently stated that several new companies will enter the index after September 19, while others will drop off. The German automobile company Volkswagen and the Spanish textile company Inditex (which rose 1.4% on the Ibex 35 yesterday) have been selected to replace Crédit Agricole and Alstom on the main European index. So what does this really mean for Spain?
Investors worldwide will be forced to buy shares in the company (in particular, the funds that seek to replicate the performance of EuroStoxx 50). According to data collected by Morningstar, there are more than 30 ETFs in the world that replicate the index (the majority are invested in more than one stock market), and collectively the funds manage over 17 billion euros in assets. Keeping in mind that Inditex's adjusted market capitalization has them putting 60% of the company in public hands, it is hoped that the company will represent approximately 0.9% of the EuroStoxx's value. ETFs tracking the EuroStoxx ought to invest 0.9% of their assets in Inditex, which would mean an influx of 161 million euros, or 0.43 of its stock market value.
This is at least true for those ETFs that try to match the index by holding actual shares of the companies in it, such as Ishares and Deutsche Bank. "ETFs that use a physical replica of the index will have to add shares of this company to their portfolio, but companies that do a synthetic replica, such as Lyxor, will get exposure through swaps," affirmed Juan San Pio, director of institutional sales for Lyxor.
