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Asset Management / Wealth Management
S&P/ASX index to track Australia agribusiness
Government plans to grow agriculture sector to US$100 billion by 2030 as global food demand rises
The Asset 31 May 2022

S&P Dow Jones Indices (S&P DJI) and Australian Securities Exchange (ASX) have lauched an index that measures performance trends in Australia’s expanding agribusiness industry.

The S&P/ASX Agribusiness Index is a broad representation of the country’s agribusiness sector and tracks the performance of ASX-listed companies that are directly engaged in or benefit from agricultural-related activities, S&P DJI says.

The index selects constituents from the largest 1,000 ASX-listed securities and applies a liquidity screening process. In addition to agricultural products, it selects companies from the other 10 sub-industries under the Global Industry Classification Standard (GICS) such as fertilizers and agricultural chemicals, paper products, food distributors, brewers, distillers and vintners, and packaged foods and meats. A list of keywords such as beverage, brew and dairy are also utilized to identify eligible companies through their business activity descriptions.

As a result of global population growth, climate change and geopolitical risks, the demand for food and other agricultural products has significantly increased worldwide, providing opportunities for exporters of high-quality products, according to the index provider. Australia is a major producer of many agricultural products including wheat, wool, and beef, and the country currently exports approximately 70% of its agricultural products. Agricultural products accounted for 12% of Australia’s total exports from 2020 to 2021.

To support the continuous expansion of the agricultural sector and to help build resilience against global challenges, the Australian government laid out the “Delivering Ag2030” plan which sets the foundations for the country’s agriculture sector to grow to US$100 billion by 2030.

The S&P/ASX Agribusiness Index is weighted by float-adjusted market capitalization, subject to a 10% single stock cap, and is rebalanced semi-annually in May and November. Real-time calculation of the index will start on July 1.

During the 2020 Covid-19 market sell-off (February to March), the S&P/ASX Agribusiness Index led the S&P/ASX 200 by 18.7% based on back-tested data, demonstrating the sector’s resilience, S&P DJI says.

“By raising the profile of the sector, the index will increase investor understanding and interest and be a critical ingredient in priming the market for the next phase of agricultural innovation,” says Ken Chapman, head of strategic delivery, capital markets, at ASX. “For many investors, the recent market volatility has highlighted the benefits of a diversified investment portfolio and of quality counter-cyclical stocks, such as those in the agribusiness sector.”

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