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Absa Capital launches two listed securities linked to Barclays Black Chips Index  

 10/1/2012 
Absa Capital, the Barclays affiliated corporate and investment banking division of Absa Bank Limited, today announced the launch of the Black Chips Protector and Black Chips Accelerator, referenced against the Barclays Black Chips Index. The Black Chips Protector and Black Chips Accelerator are among many Long Equity Investment Plan Securities (LEIPS) that make up the Absa Capital LEIPS suite of structured investment products.

The launch is in response to investor appetite for access to financially robust offshore shares via a single rand-denominated term investment, with a choice of capital protection levels.

“We have seen a strong flight to quality driven by the uncertain global and local economic environment,” said Ryan Sydow, Head of Retail Distribution at Absa Capital. “The Barclays Black Chips Index seeks to pick out the best stocks from across Western Europe, North America and Asia.”

The Barclays Black Chips Index employs quantitative measures to ensure investors participate in so-called ‘Black Chips’ - an enhancement of the ‘Blue Chips’ concept of widely regarded high quality stocks.

The companies included in the Black Chips Index are selected from a global basket based on their financial robustness, liquidity, debt to earnings levels and the amount of dividends they distribute. The index follows a specific investment mechanism defined in advance and governed by transparent rules, and is refreshed every three months to identify a new portfolio of quality stocks.

The specific selection of mechanisms seeks to identify quality stocks through the use of fundamental accounting metrics such as the Price Earnings ratio and the Return on Equity ratio.

“Based on these metrics, the mechanism removes the stocks showing least quality compared to their peers and avoids an explicit bias towards undervalued stocks,” said Vladimir Nedeljkovic, Head of Investments at Absa Capital.

“In launching the Black Chips Protector and Black Chips Accelerator, we have met the needs of investors by offering a relevant, unique and innovative solution that can be used as a building block to express tailored investment views,” said Nedeljkovic.

“By bringing the Black Chips Index to market illustrates the strength of harnessing the global expertise of Barclays for the benefit of South African investors,” said Sydow.

Ends…

Notes to editor:

About Absa Capital

Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays, is a leading South African corporate and investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.

About LEIPS

The Long Equity Investment Plan Security is a financial security listed on the JSE Limited and represents a parcel of your rights and obligations as the holder of the relevant LEIP Security. As the holder of a LEIP Security your investment return (if any) is derived from the growth (if any) of the relevant index.

To learn more about Retail Structured Products, their use in portfolio planning and more about Absa Capital’s product offering visit http://rsp.absacapital.com/Pages/default.aspx

About Barclays Black Chips Index

Building on the Blue Chips concept, the Barclays Black Chips Index aims to provide investors with access to quality stocks in various countries and sectors, through long only indices. The index mechanism is described in simple terms in the brochure as follows.

Liquidity Filter Shares which do not satisfy the following criteria are removed:
  • Market capitalisation below US$1billion
  • Average daily value traded over the last six months below US$30million
Chips Factor Two filters are the applied to the remaining shares:
  • Net debt to EBITDA (earnings before interest, taxes, depreciation & amortisation, greater than zero)
  • Dividend payout ratio less than 0.8
Shares are then ranked by dividend yield (descending order) and the top fifth are selected
Financial Screen The selected shares are then ranked by two fundamental financial metrics:
  • Price earnings (P/E) ratio which measures how expensive/cheap the share is relative to its earnings
  • Return on common equity (ROE) which measures the profitability of the company
Shares that rank in the bottom 20% of the financial screen are removed
Final Ranking
  • The final list is established by ranking the remaining shares according to their liquidity as measured by average daily value traded in the last six months
  • The 30 most liquid shares are selected and weighted according to their market capitalisation

The Barclays Black Chips Index (as at September 2012) consists of the following stocks:

Name Weight Sector Country of domicile
Chevron Corp 8.69% Energy United States
Johnson & Johnson 8.40% Consumer, Non-cyclical United States
Nestle SA 7.30% Consumer, Non-cyclical Switzerland
Philip Morris International 6.37% Consumer, Non-cyclical United States
Novartis 5.53% Consumer, Non-cyclical Switzerland
BP PLC 5.39% Energy United Kingdom
Intel Corp 5.09% Technology United States
Roche Holding 4.97% Consumer, Non-cyclical Switzerland
GlaxoSmithKline 4.66% Consumer, Non-cyclical United Kingdom
Royal Dutch Shell PLC 3.90% Energy The Netherlands
Total SA 3.89% Energy France
Eni SpA 3.30% Energy Italy
ConocoPhillips 2.88% Energy United States
Siemens 2.87% Industrial Germany
BASF SE 2.61% Basic Metals Germany
Bristol-Myers Squibb Co 2.48% Consumer, Non-cyclical United States
Bayer AG 2.45% Basic Metals Germany
AstraZeneca PLC 2.38% Consumer, Non-cyclical United Kingdom
China Mobile Ltd 2.38% Communications China
Unilever 2.33% Consumer, Non-cyclical The Netherlands
Eli Lilly & Co 2.08% Consumer, Non-cyclical United States
EI du Pont de Nemours & Co 1.85% Basic Metals United States
Kimberly-Clark Corp 1.38% Consumer, Non-cyclical United States
Emerson Electric Co 1.36% Industrial United States
Freeport-McMoRan Copper & Gold 1.30% Basic Metals United States
Lockheed Martin Corp 1.18% Industrial United States
Illinois Tool Works Inc 0.96% Industrial United States
Vivendi SA 0.92% Communications France
International Paper Co 0.55% Basic Metals United States
Eaton Corp 0.53% Industrial United States

Issued by: For further information contact:
FTI Consulting Graeme Coetzee
Tanja Vasiljevic Associate Principal
+27 11 214 2410 Marketing and Corporate Communications
+27 82 775 4810 Absa Capital
tanja.vasiljevic@fticonsulting.com +27 11 895 6695
+27 79 695 9798
graeme.coetzee@absacapital.com
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