Nasdaq to cut Apple’s weighting in the Nasdaq 100 index from 20% down to 12%

Mon, Apr 4, 2011

Finance, News

Nasdaq tomorrow will announce plans to re-weight the Nasdaq 100 index to reduce the impact of Apple which currently comprises 20% of the index.

The Wall Street Journal reports that the move is the result of Apple stock’s meteoric rise over the past few years and that the recalibration of the index will leave Apple with a 12% portion of the index. The Nasdaq 100 is comprised of the 100 largest domestic and international non-financial stocks that trade on the Nasdaq Stock Market in terms of market cap. And with over $330 billion worth of assets that closely track the index, the report notes, the move will be of utmost interest to investors.

Apple’s market capitalization is roughly $300 billion, twice that of Google. But its weighting in the index was five times that of Google. After the rebalancing, Google’s share of the index will be 5.8% compared to Apple’s 12.3%. Apple will remain the largest component of the index.

The move could mean significant selling pressure on Apple shares by money managers tracking the index. Because of the way the index has been calculated, Apple was given more than twice the weight in the index than it should have had based on its number of shares. Under the new plan, it will be reduced to the weight it should have given its size.

But it’s not just Apple that’s the subject of the reshuffling as 81 of the 100 stocks in the Nasdaq-100 will also have their share of the index reduced. That leaves 18 stocks that will see their share of the index rise, chief of which is Microsoft who will see their weighting increase from 3.4% to 8.3%.

The rebalancing, which will take effect on May 2, “is likely to kick off waves of trading in the stock market as money managers scramble to adjust holdings to reflect the new composition of the index,” Tom Lauricella writes for the WSJ. The reshuffling, though, is not specifically being done because of Apple, but rather due to reweighting being done based on outstanding shares in the index as of March 31.



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