Dow Jones Indexes has launched the Dow Jones Australia LPT (Listed Property Trust) Index, providing a sole alternative to the S&P/Australian Stock Exchange (ASX) 200 Property Trust Index in the listed property sector.
The new Dow Jones index has been licensed by the Sydney Futures Exchange as the underlying index for its planned SFE LPT Futures Contract, which is set for launch on June 21.
It will initially comprise only 15 stocks, representing 90 per cent of the Australian LPT market capitalization, based on the index’s intrinsic definition of an LPT.
This definition includes all stocks traded on the ASX that are classified as LPTs by the global sector classification standard, Industry Classification Benchmark. Controversially, this does not include property developer Multiplex.
The index will provide investors with a “transparent and objective” tool to measure LPT performance,” said Lars Hamich, managing director of STOXX, which is responsible for Dow Jones Indexes’ business development in Asia, Europe and the Middle East.
Hamich added that the launch of the index was a “response to market demand from Australian investors for a comprehensive, dedicated LPT tool based on rules and a clear methodology”.
“A survey of market participants indicated demand for an index providing efficient replication of the LPT sector using fewer constituent stocks, thereby minimizing transaction costs “
Hamish described the index as an “accurate measure of the Australian real estate sector, while being a highly liquid and tradable underlying” entity
It is designed to “underlie investment products, and we also expect additional market participants to issue trading and hedging tools based on the index,” he said.
The index, calculated both in US and Australian dollars, will be reviewed quarterly, in March, June, September and December.
Since its inception on December 31, 2001, as a means of building an index back history, the index is up 14.24 per cent (annualised total return), according to Hamich.
The indexes float-market capitalization is US$57.5 billion (A$73.6 billion) as of April 29, 2005.
