Hydrogen: changes in the Solactive Hydrogen Top Selection Index

Hydrogen: changes in the Solactive Hydrogen Top Selection Index

10 March 2021

The topic of hydrogen is at the top of the agenda for many investors. Appropriately, Vontobel’s tracker certificate TRACK HYDROGEN VON on Solactive Hydrogen Top Selection Index (NTR) has been one of our most successful investment products in terms of customer demand, but also in terms of its performance. Now there will be an index adjustment in the underlying exposure. Learn more here about what is changing.

Vontobel offers an opportunity to invest in the Solactive Hydrogen Top Selection Index in the form of an open-ended tracker certificate TRACK HYDROGEN VON (DE000VP11FY5). The index was designed in such a way that car manufacturers are excluded in from the stock selection. In this way, the index focuses solely on hydrogen. With the help of Solactive’s innovative ARTIS® algorithim, companies whose shares meet certain liquidity requirements are evaluated according to their relevance and the top 15 are included in the index. This also ensures in the long terms that the most relevant shares always find their place in the index. There is an ordinary index adjustment every six months, which involves a rebalancing of the weightings and if necessary a change of stock. The new composition and target weights will be fully reflected in the index 17th March 2021.

Rebalancing

The absolute high flyer in the past months was Plug Power’s stock. Whilst the hydrogen sector generally saw price gains following the announcement of a “blue wave” in the USA at the beginning of January, the manufacturer of fuel cells turned out to be a stock market darling. Analysts at JP Morgan described Plug Power as a “Best in Class” company in February. The share price also rose above average this year, which is why its weighting in the index rose to over 17 percent (as of 02.03.2021). It should however be noted that past performance serves as no reliable indicator of future performance. During the ordinary index adjustment, the original index adjustment, the original equal weighting is restored by rebalancing i.e. the 15 selected stocks are all weighted at 6.67 percent each. The profits from Plug Power are therefore reinvested in the new weights of other securities.

Corporate Action

Since the last rebalancing, TechnipFMC’s share has been the bottom performer in the index. The oil industry service provider recently spun off Technip Energies in a so-called “spin-off”, so that from now on two separate companies operate on the market and two separate shares are traded. While TechnipFMC continued to pursue the oil and gas industries, Technip Energies will focus on plant engineering in the hydrogen and liquefied natural gas (LNG) sector. For this reason, as of February 16, Technip Energies shares are reflected in the index rather than those of TechnipFMC.

Security selection adjustment

To prevent excessive fluctuation in the price of securities included in the index, a new security is only included in the index, if it makes it into the top 5 in the valuation model and an existing security falls back to rank 25 or worse. In the upcoming index adjustment in March 2021, this rule-based procedure will result in two changes at once.  

New additions to the index will be the shares of Fuelcell Energy Inc. and ITM Power. Fuelcell Energy is known for its highly efficient fuel cell power plants, which allow virtually emission-free energy production. It operates 50 such power plants worldwide. ITM Power, on the other hand, specializes in the production of equipment, which splits distilled water into hydrogen and oxygen (so-called electrolysers). ITM Power has built in Sheffield (UK) the world’s largest manufacturing site for such electrolysers, which was commissioned in January 2021. It was also announced that ITM is selling the world’s largest hydrogen electrolyser to Linde. Linde will install the 24 megawatt plant in Germany to supply green hydrogen to industrial customers such as fuel stations. The hydrogen produced from this plant could be enough to power up to 600 fuel cell buses every year for a total of around 40 million kilometers.

Solactive Hydrogen Top Selection Index has included shares from Linde already since its launch. In order for Fuelcell Energy and ITM Power to now be included in the Index, two other stocks must make room for them. Both Johnson Matthey and The Chemours Company, a conglomerate and chemical company, will be removed from the index. Both of these companies do not anymore represent hydrogen in their main business and their shares have underperformed in the index in recent months leading to their removal.

Important legal information

Legal notice

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

13/05/2021 14:55:16

 

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