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The BITA FAANGs 10 Equally Weighted Index (BF10EW) is the definitive benchmark stock index for the top 10 companies traded on the Nasdaq stock exchange. This index provides exposure to the highest-traded tech giants in the world, companies that are heavily capitalised and have an extraordinary growth trajectory. These companies are not only able to survive the harshest economic pressures, but they can also thrive in the midst of them. BF10EW was launched on the 7th of October 2019 by BITA, a reputable German-based FinTech company, which also maintains the index.
BF10EW launched with a value of 1000 at inception. The constituent companies of BF10EW were best positioned to weather the COVID-19 pandemic storms, and 2020 saw the index edged higher, hitting a high of above 2300 by September 2020. There was a brief pullback to just above 2000 in that same month, before a gradual drift higher saw an all-time high of above 2500 printed in February 2021. The steam then cooled off, but the index was still resting above 2300 as of April 2021.
Index Composition and Calculation
BF10EW is an equally weighted market-capitalisation index calculated using the standard Laspeyres formula. Each constituent is given the same weight (10%) at the start of each quarter, with shifting market capitalisation eventually determining the price of the index at any given time. There is a special divisor applied to maintain continuity across major corporate actions. There is also an exit buffer of 30% designed to ensure that no single constituent skews the returns of the top 10 stocks traded on the Nasdaq exchange.
BF10EW has 10 constituents, all of which must satisfy the following conditions:
- A minimum market capitalisation of $10 billion.
- A minimum average daily traded value of $10 million over the last 90 months.
The BF10EW index is rebalanced quarterly on the third Friday of March, June, September, and December, at the close of business.
Here are the current top 10 constituents of BF10EW index as of April 2021:
Baidu Class “A” 10for1 ADR
Factors Influencing the Price of BF10EW
The BF10EW index is heavy on technology stock constituents, which makes it vulnerable to several factors. A major factor in recent years has been regulation and legislation. There has been heavy interest in particular areas such as data security and privacy concerns. These companies require deep data to improve their customer targeting, but governments are rightly concerned with the safety and security of their citizens. The top 10 stocks of Nasdaq are arguably some of the best-performing companies in the world, but they are also known to trade at a premium.
While the premium is a result of their investor acceptability, it also makes them very vulnerable to sudden shifts in investor sentiment. Investors tend to overrun both positive and negative directional moves when a major or extraordinary fundamental event happens in any relevant industry. While 2020 was a bad year overall for stocks, it proved to open up new possibilities for the majority of the top 10 stocks on Nasdaq. As populations were kept indoors by governments in a bid to curb the spread of the coronavirus, the biggest tech companies positioned themselves in a manner that ensured they reaped big as online working and living became the new ‘norm’. Going forward, investors will always trust the ‘big 10’ to deal with any market stress they encounter internally or externally. In addition to the above, the price of BF10EW can also be influenced by other factors that impact indices such as interest rates, overall economic conditions, and significant price changes of major constituent stock(s).
Why Trade BF10EW
Highly liquid assets are always favoured by investors because they can be traded with transparent prices, low transaction costs, and decent volatility most of the time. FAANG Index is composed of the top 10 traded stocks of Nasdaq, and its liquidity is virtually guaranteed at all times.
- Stable Price Action.
In addition to being a liquid index, FAANG-10 index has stable price action that can be reliably predicted unless there is a significant crisis situation in the markets.
- Vast News Coverage.
By tracking the performance of the top 10 traded stocks on Nasdaq, BF10EW understandably garners massive media attention. This is vital for investors because they can accurately judge market sentiment, as well as the major fundamental and technical interest areas in the markets.
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