Bel-20 Index (Brussels)

The Bel-20 Index is a real-time (computed in principle every 15 seconds) basket of minimum 10 and maximum 20 stocks (listed on Euronext Brussels and meeting some specific criteria) that exhibits the highest free float adjusted market capitalization. The market capitalization is the public consensus on the value of a company's equity (computed by multiplying the share price by the number of shares outstanding) and the “free float” represents simply the percentage of the stocks that is freely tradable on the market. The stocks composing the Bel-20 Index are also weighted according to their market capitalization adjusted by the free float.

In finance, an index is essentially a virtual portfolio of securities representing a specific (sub-) market. Each index has its own computation methodology. The index value is meaningless (indeed it is expressed in “points”), but its changes are informative. It is not possible to invest in an index; nevertheless, one can invest in a fund (exchange-traded fund, index fund) that replicates the index (returns) as closely as possible. Different indexes need to be composed to represent the financial markets in diverse ways and to compute risk and performance measures. Indeed, a risk or performance measure alone has no value if it has not been adjusted to a pertinent benchmark.

The Bel-20 Index was launched in late December 1990 at an arbitrary level of 1,000 points (called its base value). The Bel-20 is a market value-weighted index and consists of the stocks of approximately 20 of the leading Belgian companies traded on Euronext Brussels. The Bel-20 Index is the major benchmark index of Euronext Brussels and represents the main part of the Belgian stock market. In fact, the principal objective of this index is exactly the replication of the Belgian equity market.

Its composition is reviewed annually (except for exceptional cases). This review is based on the information as of the end of December and is effective the first trading day of March. However, after a recent reform (2008), the reviewing delay can be reduced to one month (instead of one year) when the index integrates less than 20 stocks. This reform has also relaxed some selection criteria (some stocks taken over by a foreign group can remain in the index) and the weight of a Bel-20 component cannot exceed 12 percent at review time (instead of 15 percent before the reform).

In June 2008 the 20 companies composing the Bel-20 were Ackermans, Agfa-Gevaert, Bekaert, Belgacom, CNP, Cofinimmo-Sicafi, Colruyt, Delhaize Group, Dexia, Fortis, GBL, Inbev (Ex. Interbrew), KBC, Mobistar, Nyrstar, Omega Pharma, Solvay, Suez, UCB, and Umicore. The three main components were Suez (16 percent), KBC (12 percent), and Inbev (12 percent).

To improve the visibility of the Belgian equity market, Euronext Brussels integrated two other benchmarks in 2005: the Bel-Mid (composed of approximately 33 companies) and the Bel-Small (composed of approximately 46 companies) Indexes. Their composition is reviewed each quarter (which is generally more frequent than the Bel-20 Index) and these two indexes are also continuously quoted. Together, the [Page 133]three indexes (Bel-20, Bel-Mid, and Bel-Small) cover about 70 percent of the Belgian listed companies. There are an increasing number of financial products that derive their value from the Bel-20 Index. Indeed, investors can buy futures contracts, options contracts, and other more complex derivatives on the Bel-20 Index.

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