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BERLIN -- If you've invested in a European index-tracking mutual fund, the tiny bits of the Continent's blue-chip companies that you own are about to get a good shuffling.

Last week, index compiler


announced plans to shift its indices to free-float weightings, meaning stocks will be rated on the shares actually available to investors instead of a company's total market capitalization. Firms that still have large government-controlled stakes like

Deutsche Telekom

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France Telecom


will see their rankings scaled back considerably, while other, smaller companies may be tossed out of indices like the pan-European

Dow Jones STOXX 50


For mutual fund investors, that might not mean much more than your portfolio manager getting a headache from having to rejuggle the holdings of his or her fund. But investors holding shares or ADRs of the specific companies being reweighted or thrown in or out of a prestigious index could be in for a rocky ride if they aren't paying attention.

As investors digested the Stoxx news last week, Deutsche Telekom and France Telecom lost heavily while telco-equipment makers


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all surged higher. By Friday DT and France Telecom had shaken off the initial shock, closing up 1 5/8, or 2.91%, and 1 9/16, or 1.1%, respectively. However, those shares and others could experience continued volatility in the coming week and beyond as investors sort out the final implications of the free-float decision.

On Friday, Stoxx published new estimates based on the reweightings and the effects were considerable. Deutsche Telekom dropped from the second-largest company according to free-float market cap to No. 6, while France's Alcatel vaulted from 13 to No. 5

Stoxx will announce the final alterations to its blue-chip indices after the summer holidays in August and the changes will then go into effect on Sept. 18. Until then the shares of companies thought to be getting booted from indices will likely come under pressure, as investors try to get ahead of the index-trackers who will only rejigger their portfolios when the actual change takes place.

"From a stock-by-stock point of view the changes could be pretty significant," says Anna Mackman, an equity strategist for

Credit Suisse First Boston

in London. The stocks expected to be adversely affected by the new weighting "will probably work through the initial hit

from last week over the next couple of months and will then get hit again as the actual change takes place in September."

According to research by

Dresdner Kleinwort Benson

, German insurer

Munich Re

and Dutch telco



will both be dropped from the Stoxx 50.


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BNP Paribas

will take their places. In the euro-zone specific Euro Stoxx 50 French food giant

Groupe Danone


is in and German retailer


is out.

Munich Re may get pushed out because the new weightings not only affect big government-held stakes, but also large corporate cross-holdings, which Munich Re and fellow insurer


have extensively. However, things could change rapidly beginning next year, as the German government is working on tax reform proposals that could eliminate a punitive corporate-gains tax and unleash a massive rejuggling of holdings.

After the Stoxx announcement

Deutsche Boerse

said it had no plans to change its weighting rules for such indices as the


. But the national indices would be under pressure to do so if other big international index compilers such as




follow Stoxx to free-float rankings, according to Mark Howdle from

Schroder Salomon Smith Barney


And that could mean your slice of corporate Europe might get shuffled all over again this fall or next year.