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DFM to adopt new index methodology upon deal with S&P Dow Jones Indices

DFM to adopt new index methodology upon deal with S&P Dow Jones Indices
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Dubai – Mubasher: Dubai Financial Market (DFM) plans to apply a new methodology for its DFM General Index, DFM Sharia Index, and DFM Sector indices during the fourth quarter (Q4) of 2022 after closing a market consultation on the new index methodology by 17 October.

The indices will be calculated by S&P Dow Jones Indices, which will offer technical support to the calculation of the DFMs General Index, the Sectoral Indices, and the Sharia Index in line with the DFM index rules.

The agreement between both DFM and S&P Dow Jones Indices is expected to facilitate an appropriate setting for the introduction of other index-related products in the long term, according to a press release.

The new methodology will include capping the threshold of a DFM index individual constituent at 10% of the index weightage instead of the current 20%. This step is expected to eliminate the effect of limited number of companies on the index.

Furthermore, calculation of the index will be based on actual free float adjusted market capitalisation as well as quarterly rebalancing of the index replacing the current semiannual review.

The changes will also include the DFM’s sectors which will be aligned with the Global Industry Classification Standard (GICS), tracked by institutional clients.

DFM’s sector will accordingly consist of seven sectors: financials, Industrials, real estate, utilities, communication services, materials and consumer staples.

CEO of DFM and Nasdaq Dubai, Hamed Ali, said: “The improvement of the DFM indices underlines our commitment to further enhance our market services. This supports the strategic plan to develop Dubai’s financial markets by aligning our indices’ methodology and sector classifications with the international best practices.”

Ali added: “We are pleased to select S&P Dow Jones Indices, the world’s leading index provider, as our calculation agent to introduce reliable and transparent reference prices that support investment activities on DFM.”