IN THE NEWS / TSE 300 Finally Cuts Its Exposure To Resources
Tech Stocks Added
By IAN KARLEFF The Financial Post
The Toronto Stock Exchange 300 composite index is catching up with the times in this year's annual facelift by reducing its exposure to resources and bulking up on technology and real estate issues.
Of the 16 companies being ousted from the benchmark index when the TSE opens Feb. 19, there are five gold and two other miners, two paper and forestry firms and one oil and gas company.
Replacing the depressed resource sector are a few emerging technology companies, including Certicom Corp., which has yet to record a profit; Architel Systems Corp., three real estate firms, two hospitality companies, and a hodgepodge of others.
"It's a sign of the times," said John Ing, president of Maison Placements Inc.
This also marks the second time this month changes have been announced for the benchmark index.
Today, three small resource companies will be removed from the index because of a decline in market capitalization. Replacing them will be a corresponding number of high-flying technology stocks.
Inclusion in the index is primarily judged by a company's quoted market value (QMV), or, simply put, its market capitalization. When the volume of trading declines in an issue, and its stock price retreats considerably, its QMV falls, as does its relative ranking.
Because of its heavy resource component, now at about 20%, analysts say the TSE 300 performs differently to comparative U.S. indexes.
"The makeup of the TSE 300 tends to be more of a coincident or lagging indicator rather than a leading indicator," said Mr. Ing.
Changes to the index over the past few years have resulted in the resource component dropping to about one-fifth from 37% in 1995.
Institutional investors have long complained the available TSE indexes were unrepresentative of the overall Canadian economy.
Their cries led to the creation of the S&P/TSE 60, which was first quoted Dec. 31, 1998, and has a resource weighting of 21%.
Changes in the TSE 300 will also affect inclusion in the TSE 200 and announcements of the new weightings will be made in one week.
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