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To: thebeach who wrote (8079)	11/30/1998 9:17:00 AM
From: Chris Stovin	Respond to of 18016

Wednesday's Menu item....from today's Ottawa Sun... Monday, November 30, 1998 Cashing in on the new index By David Houghton, Ottawa Sun The news that the Toronto Stock Exchange and Standard and Poor's have worked on the creation of a new index should be rejoiced. Currently, in Canada we have indices which are under-utilized and poorly understood and the new S&P/TSE60 index should address some of the current crop's problems. The broad TSE 300 is meant to be a bellwether of the whole market. Like all indices of course, it's weighted largely along market capitalization of the underlying stocks, but because it's so broad it is not indicative of what many portfolios return. The TSE 35 is a sort of Goliath 300 with only the biggest of the big and acts more like a true blue chip or Dow Jones Industrial Average type of indicator. The problem with this is that here you are looking at a very few, very big cap stocks which may or may not look like a lot of portfolios. However, the 35 provided a lot of liquidity to hedgers as the stocks in the portfolio trade hundreds of thousands of shares a day whereas the TSE 200 and 100 indices were simply too thin. Anyone trying to hedge using the 200 or 100 would find that many of the underlying stocks couldn't be bought or sold efficiently. In other words, it was too easy to move the price of the smaller stocks in the index up or down, which defeats the purpose. The plan is to eliminate all three -- the 35, 100 and 200 indices -- over the next couple of years and concentrate on the 300 and new 60. Of course, now the guessing game is on and has been for a few weeks to attempt to determine which companies will be in the new index. Those already in the TSE 35 will likely get an automatic nod and the biggest cap names thereafter will be the most likely candidate to round out the number. But those not currently in the 35 and which get chosen for the 60 are likely to have a small jump in price as index funds and index shadowers will buy those stocks in an effort to mimic the index's returns in the future. Currently, retail investors can accomplish something like that with TIPS and HIPS. Both are closed-ended funds which invest in the TSE 35 and TSE 100 indices' underlying stocks in exactly the right proportions guaranteeing the holder to index-like returns. I say "like" because there is a very small charge levied to both TIPS and HIPS to cover the cost of collecting dividends and reinvesting and making adjustments as the underlying indices change. It's interesting to note that there are all kinds of index mutual funds that have higher management expense ratios than either TIPS or HIPs and yet people continue to buy them. The fact that investors buy either is an indication of surrender by many who feel that there's no beating the index. I for one disagree and am keeping up the good fight for better returns. Hell, if you're that cynical, I'd like to know how you determine which index is the one you'd like to invest in. Similarly, you can choose to invest in the S&P 500 big blue chip index in the U.S., which for most of the past 20 years, has whipped our own TSE. The new S&P/TSE 60 will be announced tomorrow and will become a reality on Dec. 31. It's a good thing for professional money managers but will not mean a lot to the average retail investor other than the fact that the mutual funds he holds could be better hedged. Stay tuned for lots of hoopla.

To: thebeach who wrote (8079)	11/30/1998 9:29:00 AM
From: Chris Stovin	Read Replies (1) \| Respond to of 18016

And another report from the Financial post from Nov. 26th... Thursday, Nov. 26, 1998 Bay Street tries to fill in the blanks for new benchmark D-day for TSE index By WILLIAM HANLEY The Financial Post Bay Street is in the grip of an educated guessing game as the unveiling of member stocks of the new S&P/TSE 60 index approaches after the market closes on Tuesday. Shortly after 4 p.m. on Dec. 1, the investment community and nervous executives at some big companies across Canada will learn which 60 companies have made it into the new charmed circle of the stock market, getting an automatic boost before and after the index is launched on Dec. 31. William Jordan, director of communications for Standard & Poor's Corp. index services, which is launching the S&P/TSE 60 in partnership with the Toronto Stock Exchange, said yesterday he had even heard from one potential member company asking what it could do to gain membership in Canada's most exclusive new club. Rumours are flying on the Street over which dark horse stocks may make the list. Will all the TSE 35 stocks make it? And which 40 of the TSE 100 might not? Inclusion in the S&P/TSE 60 is so crucial to a company's market fortunes and access to capital because the index will become the international benchmark for the Canadian market, replacing the 35 and 100, which include the current blue-chip elite. New derivative products will be based on the 60 -- the term SIPs is already gaining currency on the Street -- and the fund managers that use indexes to match market performance will buy weightings of the stocks in the new measure. The S&P/TSE 60 is part of S&P's plan to launch an S&P global index next fall. This index will have 1,200 stocks -- the S&P 500 from the U.S., 60 from Canada, 40 from Latin America, 200 from Euroland, 150 each from Britain and Japan, and 100 from the Asia-Pacific, excluding Japan. With the Canadian market making up less than 3% of the world t total on a capitalization basis, inclusion of 60 Canadian stocks in the S&P global index is seen by S&P and the TSE as a strong showcase for Canadian equities. Mr. Jordan said the same strict criteria used to select the S&P 500, the market-cap weighted U.S. professional benchmark, have been applied to pick the new 60. While market capitalization and trading volumes are essential, other qualifications are important, too. A history of earnings is essential to keep out stocks such as Bre-X Minerals Ltd., which found itself in the TSE 300 and caused the exchange embarrassment when it collapsed. The S&P/TSE 60 will contain stocks from all 14 TSE subindexes, which will fit into 11 S&P industry subgroups. For instance, though there is no real estate and development subgroup among the 11 S&P groups, the TSE's TrizecHahn Corp. might be placed in the financial group, were it to be included. Though TrizecHahn would certainly qualify on market-cap terms, it might not be included because it is not a liquid stock. This type of "guesstimation" is rife on Bay Street because inclusion in the S&P/TSE 60 will certainly up the bidding tempo of some of the member stocks. Meantime, though, the Street is still concerned about letting the 35 TIPs and 100 HIPs units "die nobly and naturally," as one derivatives specialist said. Mr. Jordan was at pains to emphasize that the phasing out of TIPs and HIPs will be orderly, probably taking at least two years and costing a few cents a share in transition costs. Last week, some traders worried that the situation held potential for disruption and losses for investors.