High index in the Netherlands
This week we take a look at a small European: the AEX. The index, which lists the 25 largest Dutch companies, has performed well since the beginning of the year. Even if it does not do as well as its Swedish counterpart which we talked about last week (OMXS 30), the AEX still shows a nice increase of 13.5% on the first of January, better than the CAC and its 10%. The index was carried by its largest capitalization, ASML, which signs a rise of more than 30% over the same period and becomes the 4th European capitalization. It is also benefiting from the rise of all sectors since the beginning of the year, like the financial sector, which is up nearly 30%, energy (15%) and finally tech (20%).
The cities of the future with the MSCI Smart Cities Index
The index proposed by MSCI gathers companies that can benefit from the megatrend that are "smart cities". Demographics and densification are constantly increasing in cities around the world. This forces us to find new solutions and smart innovations to solve housing, energy and mobility issues for the cities of tomorrow. The Smart Cities Index is composed of about 480 companies, from developed and emerging countries, and of all sizes. Logically, the most represented sectors are industrial and technology stocks. The strong presence of the latter, 50% of the composition, has allowed it to rise by 70% over one year. Since its creation in 2013, the index has posted an annualized performance of 14.5%.
The largest weightings in the index (Source: MSCI)
Among the largest weightings, we find the French company Schneider Electric. The leader in electrical management and a specialist in automation systems is established throughout the world. The company fits perfectly with the development of the cities of the future. There are also many companies in the semiconductor sector, which represents the future of the industry. You can find more detailed information on the past performance and the composition of the index here.
Lyxor offers an ETF that allows exposure to this index and also takes into account ESG criteria to filter companies: Lyxor MSCI Smart Cities ESG Filtered.
An index to think outside the box
How to track emerging markets beyond the countries traditionally associated with the theme? The answer may lie in the FTSE Frontier 50 Index. This index includes the 50 most liquid stocks in an eligible universe of 26 "frontier" countries, i.e. countries that are not part of the traditional major blocs. It includes, for example, Morocco, Kenya, Iceland, Peru, Lithuania and Vietnam.
The sum of the capitalizations reaches $70.55bn, with the largest player weighing $4.2bn and the smallest $165m. The median is $1.14bn. The top five positions in the index are Vinhomes (Vietnam ), Marel (Iceland ), Vingroup (Vietnam ), Itissalat Al Maghrib (Morocco) and Safaricom (Kenya)
Historical performance has not been stellar: +2.2% per annum on average over five years, compared with 12.3% for the FTSE Emerging Large Cap Index. The years 2018 and 2020 have weighed heavily on the FTSE Frontier 50. But past performance is no guide to future performance, after all.
Sector breakdown of the FTSE Frontier 50 (source FTSE Russell, 31 March 2021)