The Straits Times Headline: STI fall below 3,000 points

[pantoo]

Assuming an index is made up of two components with market cap of $50mil each and the resultant index is 100. Say they reviewed and change one of the components and the new component has market cap of $40mil. With the change the resultant index becomes 90. So there is a 10% change not due to market driving it.

the formula for the STI calculation (which is true for most FTSE indexes):

sum[ (market cap*investibility factor*capping factor)/divisor ]

the calculators will be able to adjust capping factor to ensure continuity of the index on constituent changes.
(it seems investibility factor is a measure of free float while divisor is used to deal with share capital changes e.g. splits)

Based on your reply above, does it mean to say that resultant index is not affected by a change in components? So for example, if a huge market cap stock (larger than Singtel) comes on board the STI, the index will not automatically increase due to the large market cap?