Over the last couple of years the way that local listed property indices are put together has come under a lot of scrutiny. A number of investors, asset managers and academics have expressed concerns about their construction....The JSE therefore realised that it needed a new approach, and its proposal is to implement three different property indices. These would replace the current Sapy and the Capped Property Index.“The first will really target South African real estate investment trusts (Reits),” Randall says. “This is for the investor looking for South African management, South African companies, and mostly South African property.”...The second index proposed by the JSE is an ‘All Property Index’, which would include foreign property companies for the first time....“The third variant would have a focus on liquidity,” says Randall. “What we want to do is take the All Property Index and only include a subset – those counters in the large and mid cap indices. The thinking there is to get an index that will support a derivative contact on the exchange. At the moment we don’t have any active derivative contacts on Sapy, so we need one that can absorb the kind of volumes you need in that product.”...The JSE has also suggested that any, or all, of these indices could be capped so that no one counter could make up more than a certain percentage of the index. The discussion document shows an illustrative cap of 15%, but Randall says that different people will have different ideas as to what is suitable.
