PSI-20
| Foundation | 31 December 1992 |
|---|---|
| Operator | Euronext |
| Euronext Lisbon | |
| Constituents | 20 |
| Type | Large cap |
| Market cap | €61.50 billion (end 2010) |
| Weighting method | Capitalization-weighted |
| Related indices | PSI Geral |
| Website |
The PSI-20 (an acronym of Portuguese Stock Index) is a benchmark of companies that trade on Euronext Lisbon, the main of Portugal. The index tracks the prices of the twenty listings with the largest market capitalisation and share turnover in the PSI Geral, the general stock market of the Lisbon exchange. It is one of the main national indices of the pan-European stock exchange group Euronext alongside Brussels' BEL20, Paris's CAC 40 and Amsterdam's AEX.
The PSI-20 was initiated on 31 December 1992 with a base value of 3,000 index points. The index experienced considerably more volatility than the world's main financial markets between 1998 and 2000, caused by uncertainty in the world's emerging markets: a sharp increase of over 50% in the PSI-20's value in the first four months of 1998 was followed by a decline of similar magnitude between July and October of that year. Another price surge sparked at the tail end of 1999 peaked with the index's highest value to date, 14,822,59 set on 3 March 2000. The Portuguese market's subsequent performance has broadly followed the trends set by other Western indices, falling in the aftermath of the dot-com bubble before recovering significantly from 2003 onwards.
Prior to a change in the index rules in July 2007, the PSI-20 composition was reviewed twice a year in January and July. In a move to increase the stability of the index, the review frequency was at this time switched to annually, commencing on the first trading day of March 2008 (in line with the BEL20 and AEX). Responsibility for the rules and composition of the index rests with an independent PSI Steering Committee, which publishes any decisions a minimum of one month before they become effective.
From the March 2008 reshuffle onwards, prospective PSI-20 companies are required to possess a "trading velocity" (the fraction of the company's free float shares which have changed hands over the previous calendar year) of at least 10% so as to safeguard the liquidity of the index. All listings on the stock exchange which satisfy this criterion are ranked by the total value (in Euros) of traded in the previous year (thus taking both market cap and liquidity into consideration), and this classification is used to choose the index's constituents. Any existing constituent which falls below 22nd place in the ranking is automatically removed from the index, and any non-constituent which rises above 18th place is added to the index. If existing constituents occupy positions 21 and/or 22, they stay in the PSI-20 provided no non-constituents have risen above 18th position to replace them. Likewise, non-constituents holding positions 19 and/or 20 are not promoted unless a slot in the index is freed up by a constituent falling below 22nd place.
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