A notable aspect of this year's remarkable surge in technology stocks has been the significant influence exerted by the market's most valuable tech companies in terms of market capitalisation. This situation has presented a distinct challenge for the Nasdaq 100 stock index, which monitors the top 100 companies traded on the Nasdaq exchange.
On Monday, the stocks of major companies like Apple (AAPL.us) and Microsoft (MSFT.us) experienced a decline following the announcement by Nasdaq Inc regarding its decision to rebalance the Nasdaq 100 index (NAS100). The purpose of this rebalancing is to rectify the issue of "overconcentration" in the benchmark.
Nasdaq will implement a "Special Rebalance" of the index to "address overconcentration in the index by redistributing the weights."
The adjustment will be determined by the number of shares outstanding as of July 3. The changes will be officially announced on July 14 and will take effect prior to the opening of the market on July 24.
The Nasdaq 100 consists of the 100 largest companies traded on the Nasdaq exchange. Any modifications made to the index will require investment funds that track it to make corresponding adjustments to their portfolios. Consequently, these funds will be compelled to sell shares of companies whose weight in the index has been reduced and add to their positions in other stocks.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.