SIGnet Sector Average Index (SSAI)

Purpose

To provide investors with a better measure of the UK equity market than the FTSE 100, 350 and All Share indices.

Problem

The FTSE 100, 350 and All Share indices are all dominated by a small number of multi-national companies with exceptionally high Market Capitalisations e.g.:- HSBC, BP, Vodaphone, GlaxoSmithKline.  With the All Share Index 1% of the companies make up about 40% of the Capitalisation!  Furthermore these indices are dominated by a small number of sectors.

While the FTSE 250 index does not suffer from domination of the largest companies, shares from five sectors (out of 38) add up to 40% of the 250 e.g.:- Support Services, Real Estate, General Finance and General Retailing.

Method

The SIGnet Index is based on the unweighted average of the FTSE Sectors Indices.  Thus each of the indices has an equal influence irrespective of its size.  There are 38 in all with 2 excluded because of insufficient companies – Forestry & Paper and Industrial Metals.

Limitations

The FTSE Sector Indices, on which it is based, are themselves based on the constituents of the FTSE All Share Index and thus exclude Fledgling, AIM and PLUS companies.

Applications

It can be used for a basis against which to compare share and portfolio performance.  The FTSE 100 and All Share indices are commonly used for this purpose.  The SIGnet Index is currently more demanding because the usual indices have been depressed by the dominating companies.  Its performance and that of the FTSE 250 compare closely.

Sources

ShareScope calculate the SIGnet Index daily and include it in their Indices Section.  It is charted back to the beginning of 2000.  The SIGweb site provides a quarterly chart of the SIGnet index and the FTSE 100, 250, Scap, All Share, Fledgling and AIM All Share indices.  Also a monthly showing changes in values.