MSCI Australia has launched a competitor Australia 200 index as well as a high dividend yield index as it seeks to provide more domestic offerings.
“We see there is a need in Australia for a few more tools in the toolkit,” said MSCI Australia executive director, Michael Anderson, referring to the various regulatory and market pressures.
Anderson said the MSCI Australia Select High Dividend Yield Index and the MSCI Australia 200 Index were developed in response to the specific needs of the Australian investment community, which he added would bring greater index diversity to the market.
The MSCI Australia Select High Dividend Yield Index is a diversified index of Australian securities with higher than average dividend yield and the potential for franked dividend income, while the MSCI Australia 200 Index is designed to reflect the performance of the largest 200 companies of the domestic Australia equity market, excluding foreign companies listed on the Australia Stock Exchange.
Anderson said the demand for the high dividend yield index is a result of a change in demographic as high dividend yield has become a “hot topic”.
“Australia has always been a fairly high dividend yield country, and clearly the franked dividends have been something that has been attractive to people for some time,” he said. “Certainly there’s a lot of discussion at the moment in terms of people and their income streams that they might need in retirement.”
However, he said in chasing high yield investors needed to be cautious of the actual stocks.
“Does it just have a high yield because the price has gone down, and has that price given you some signal about the future,” he questioned.
Anderson said there are currently only 38 stocks that meet their dividend sustainability and persistent payout criteria.
MSCI Hong Kong executive director, Mark Valadao said this index provides meaningful segmentation of the market, based on very transparent methodologies.
“We’re very well known for segmenting broad markets across the world, but I think there’s also a need to segment the market in terms of value growth and high dividend yield,” he said.
Referring to the Australian 200 index, Valadao said it provides an alternative and more choice in terms of methodology to other broader market indices.
“This index is a pure Australian domestic index,” he said, adding that it covers about 87 per cent of the entire domestic Australia market, excluding the foreign companies.
Anderson said because the index does not include foreign domiciled securities, it is a better representation of the Australian share market and Australian companies.
