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UBS Launches Alternative Benchmark Index Series Amid News Corp Woes

Strategic Insights

— 2 min read

UBS has announced plans to launch an alternative benchmark index series, which would include News Corporation shares, amidst a slump in the company's stock price due to its planned relocation to the US. The decision comes as investors continue to dump stock in Rupert Murdoch's company, driving its share price down more than 4% to $12.58. The new index series would operate by adding News Corp prices after the close of US trading, satisfying 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 includes News Corporation shares, despite the company's share price plummeting 58 cents to $12.58.
  • The new index series would operate by adding News Corp prices after the close of US trading, allowing for a more orderly transition of holdings in the company.
  • The move is seen as an opportunity for investors who want to track the stock, but investors have dismissed the plan as "irrational" and expect continued downward pressure on News Corp's share price in the near term.
  • About $100 million in News Corp normal and preferred stock was traded in a frenzied 20-minute period at the start of the session, with over $700 million changing hands by the end of the day.
  • Analysts estimate that if News Corp is removed from the S&P/ASX 200 and 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 might increase in the run-up to the shareholder relocation vote, analysts said, but the move would happen regardless, with resistance deemed "futile."

Statistics:

  • News Corp stock price slumped 4% to $12.58, having traded as low as $12.42.
  • About $100 million in News Corp normal and preferred stock was traded in a frenzied 20-minute period at the start of the session.
  • Over $700 million in News Corp stock changed hands by the end of the day.
  • Analysts estimate that $US7 billion ($A10.1 billion) worth of stock sales would follow if News Corp is removed from the S&P/ASX 200 and MSCI Asia indices and included in the New York Stock Exchange's S&P 500.
  • Estimated trading volume affected by the move: over 30 days' worth.

Sources:

  • Sydney Investment Bank UBS
  • Bloomberg
  • The Australian
  • Standard & Poor's
  • Australian Stock Exchange
  • Matrix Asset Management
  • Goldman Sachs JBWere
  • JP Morgan

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