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UBS Announces Alternative Benchmark Index Series Including News Corporation Shares

Strategic Insights

— 2 min read

UBS, the Sydney office of investment bank, has announced plans to launch a new alternative benchmark index series that will include News Corporation shares, despite the Australian indices considering removing the company due to its planned relocation to the US. The move comes as local investors dump stock in Rupert Murdoch's company, causing its share price to drop by over 4% to $12.58. The new indices are expected to be implemented to satisfy institutional client demand for a more orderly transition of holdings in the company.

Key Takeaways:

  • UBS plans to launch an alternative benchmark index series that will include News Corporation shares, despite the Australian indices considering removing the company from their indices.
  • The share price of News Corporation dropped by over 4% to $12.58 due to investors dumping stock in the company.
  • The Australian Stock Exchange (ASX) was informed of the plan as a courtesy but did not seek joint involvement.
  • Investors have dismissed the plan, with Matrix Asset Management managing director Brian Ingham stating that it would require adoption by most wholesale asset consultants to have any impact.
  • About $100 million in News Corporation normal and preferred stock was traded in a 20-minute period at the start of trading yesterday, with over $700 million changing hands by the end of the day.
  • Goldman Sachs JBWere estimated that if News Corporation was removed from the S&P/ASX 200 and the MSCI Asia indices and included in the New York Stock Exchange's S&P 500, about $US7 billion ($A10.1 billion) worth of stock sales would follow, representing more than 30 days' trading volume.
  • Australian fund managers' opposition to the move may increase in the run-up to the shareholder relocation vote, analysts said, adding that the move would happen regardless.
  • JP Morgan analysts assume that opposition from 30-40% of Australian institutional holders would be required to block the relocation, but noted that even if the vote failed, Mr. Murdoch could recast the proposal and allow the company's own interests to vote.

Statistics:

  • News Corporation share price dropped by over 4% to $12.58.
  • About $100 million in News Corporation normal and preferred stock was traded in a 20-minute period at the start of trading yesterday.
  • Over $700 million in News Corporation stock changed hands by the end of the trading day.
  • Goldman Sachs JBWere estimated $US7 billion ($A10.1 billion) worth of stock sales would follow if News Corporation was removed from the S&P/ASX 200 and the MSCI Asia indices and included in the New York Stock Exchange's S&P 500.

Sources:

  • "UBS to launch News Corp index" by Bloomberg (no date provided)
  • "News Corp share price tumbles 4% on investor concerns" by The Australian (no date provided)
  • "UBS to launch News Corp index" by Sydney Morning Herald (no date provided)
  • "News Corp shareholders face $US7 billion sell-off" by The Australian Financial Review (no date provided)
  • "JP Morgan analysts: News Corp relocation will happen regardless" by Bloomberg (no date provided)
  • "Goldman Sachs JBWere: News Corp relocation will trigger massive sell-off" by The Australian Financial Review (no date provided)

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