PSE reconstitutes index on November 3
October 22, 2009 by dragon
Starting November 3, the Philippine Stock Exchange Inc. (PSE), which runs the country’s bourse, will include itself in its benchmark 30-company index.
IN: DMC, SECB
OUT: VLL RCB ABS
The announcement “marks the first time the PSE will be included in the main index, joining listed exchanges such as Singapore Exchange, Hong Kong Exchanges and Clearing Ltd. and Australian Securities Exchange, among others, that currently form part of their main stock market indices," the PSE said in a statement.
Together with DMCI Holdings Inc. and Security Bank Corp., the PSE will replace three other companies – Vista Land and Lifescapes, Inc., Rizal Commercial Banking Corp. and ABS-CBN Broadcasting Corporation. – in the bourse’s main index, the PSE said.
The move was undertaken after the PSE reviewed trading activity of its main and sectoral indices from July 2008 to June this year.
Inclusion in the main index – a basket of 30 stocks – requires companies to comply with five criteria.
The first requirement is that a company’s free float level – the amount of tradeable shares in the market – should represent at least 10 percent of a stock’s outstanding shares.
The second criterion – liquidity – requires that the value amount of shares traded during the review period should not be less than P5 million.
The volume turnover criterion prescribes that the total volume of shares traded must be at least 10 percent of the company’s free float shares, the same statement said.
To meet the tradability criterion, a company must be traded at least 95 percent of the days that its shares are eligible for trading.
Free float market capitalization is computed using the volume weighted average price of a listed stock during a particular review period.
Companies that pass the first four criteria are ranked from highest to lowest based on free float-adjusted market capitalization.
The top 30 in terms of free float market capitalization are included in the PSEi, the PSE said.
In the meantime, among sectoral indices, all six sectors shall have fewer member-companies by a total of 18 firms.
Only two companies will be added to the six sector indices. Metro Pacific Investments Corp. and Apex Mining Company, Inc. will become new members of the Holding Firms and Mining and Oil indices, respectively.
“The reduced number of members in the sector indices primarily reflects the slowdown in market trading during the review period," PSE president and chief executive officer Francis Lim said.
In selecting companies that will comprise the sector indices, the PSE considers liquidity and tradability.
Under the liquidity criterion, the average daily trading value of the company’s shares must be at least P1 million.
Under tradability, the company’s shares must be traded at least 75 percent of the total days that these shares are eligible for trading.
“This recent review follows the same objective criteria for inclusion in the PSEi which we have set out in 2006," PSE president and chief executive officer Francis Lim said. “The need to recompose the members of the index becomes more relevant in light of the financial crisis that has impacted the landscape of trading in the market." – GMANews.TV
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