S&P Dow Jones Indices (S&P DJI), a provider of financial market indices, has announced the launch of the S&P Quality South Africa Index, which is designed to measure high quality stocks in the South African equity market.

The S&P Quality South Africa Index is comprised of the 20% (top quintile) of stocks from the S&P South Africa Composite Index, which are selected using a “high quality score” that is calculated based on three fundamental measures: return on equity, accruals ratio and financial leverage ratio.

Each stock in the S&P Quality South Africa Index is weighted by its quality score and multiplied by its float-adjusted market capitalization.

Vinit Srivastava, Senior Director, Strategy Indices at S&P Dow Jones Indices, said: “We are proud to continue to expand the range of factor-based indices in South Africa with today’s launch of the S&P Quality South Africa Index. We now have the widest range of factor-based indices in the region, which speaks to our commitment to Africa and our ability to create innovative indices.”

The S&P Quality South Africa Index joins the following factor-based indices already available for the country: S&P Low Volatility South Africa Index, S&P Dividend Aristocrats South Africa Index, S&P Momentum South Africa Index, S&P Equal Weight South Africa 50 Index, and S&P GIVI South Africa Index Family indices (S&P GIVI South Africa Composite Index, S&P GIVI South Africa Financials Index, S&P GIVI South Africa Industrials Index, S&P GIVI South Africa Resources Index, S&P GIVI South Africa LargeMid Capped Index).

The Index has been licensed to Satrix, a provider of passive investments in South Africa, for the development of a unit trust.

Helena Conradie, CEO of Satrix, said: “We are extremely excited to license the S&P Quality South Africa Index from S&P Dow Jones Indices. The combination of the well-established Satrix brand, S&P DJI’s strong data management, as well as our combined research capabilities, makes this a natural fit for us."

"We believe the sustained domestic and international growth of the passive industry will remain robust. S&P DJI’s burgeoning presence in South Africa is welcome and should lead to greater efficiencies in the local industry from which investors will ultimately benefit,” she said.