NEW YORK: The hot and rapidly changing tech sector has prompted the S&P 500 stock index to reshuffle its components, opening up more chances to invest in Google, Netflix, Facebook and other stars after Friday’s trading session. Facebook did not yet exist and flip phones were cutting edge in 1999 when the industry classification system was launched, but much has changed in tech, telecommunications and media.
The reorganization of the industry groupings, the biggest in the history of the system, affects three of the 11 sectors within the S&P 500.
A new “communication services” group has been created that will be bigger and more growth-oriented than the sleepy “telecommunication services” sector it is replacing. The change will split some the five “FAANG” behemoths associated with the stock market’s surge into different groups, allowing investors to have more exposure to the companies. The shift comes only weeks after Apple and Amazon eclipsed $1 trillion in market capitalization and shows again how technology companies are moving into ever-expanding economic terrain.
“The ways in which people communicate and seek information have transformed,” S&P Dow Jones Indices said. “Integration between telecommunications, media, and internet companies in terms of both infrastructure and content have advanced the communication industry into a much broader field as evidenced by the convergence between telecom and cable companies.”
The rejiggering of the groups will lead to a shifting of billions of dollars of shares in these companies, especially through exchange-traded funds that are linked to S&P sectors.
While analysts do not expect a pickup in volatility because the move was announced last year, further investment in technology is likely because there will now be two groups heavily weighted to the sector instead of one. – AFP
