Tuesday, April 29, 2008 PSE to revise composition of indices in May
THE Philippine Stock Exchange (PSE) has announced that its indices will once again undergo changes in composition following the latest free float-based review of trading activity for the whole of 2007.
Four firms will gain entry, and an equal number will lose their slots in the main index, said Francis Lim, PSE president and chief executive officer.
In all, the six sector indices will add 18 companies and lose three others, he added.
Six companies will make it to the Services Index; three to the Holding Firms Index; two each to the Industrial Index, the Property Index, and to the Mining & Oil Index; and one will be added to the Financial Index.
At the same time, one company each will be removed from the Financials Index, Services Index, and Holding Firms Index.
The PSE does not set a limit on the number of companies that make up the sector indices, but it limits to 30 the number of firms in the PSEi, which is the main index of local stock price movements.
The PSE president disclosed that the changes in the composition of the indices will take effect on May 26.
Direction
The price movement of these firms, thus, will determine the direction of the PSEi from that date onwards for six months or until the PSE completes another index review.
The latest review covered trading activity from Jan. 1 to Dec. 31, 2007.
“As we complete another review of the indices, we in the PSE reiterate our position that the free float methodology in
computing the index benefits both investors and the listed companies alike,” Lim stressed.
“That’s because the exercise encourages companies to increase their free float,” he explained. “In the process, they increase the level of activity in our market, and this increased activity in turn helps enhance the value of the stocks.”
Those added to the PSEi are Philippine National Bank, Rizal Commercial Banking Corp., Union Bank of the Philippines and Vista Land & Lifescapes Inc. Those to be removed are ABS-CBN Broadcasting Corp., Belle Corp., DMCI Holdings Inc. and Petron Corp.
The Services Index, whose number will go up from 16 to 21, will remove one firm (Ionics Inc.) and add the following: Diversified Financial Network, Inc., IPVG Corp., Island Information and Technology Inc., Music Corp., Pacific Gaming Online Systems Inc., and Transpacific Broadcast Group International Inc.
Firms in the Financial Index will go up to 17 with the inclusion of Bankard Inc. and National Reinsurance Corp. of the Philippines, and the removal of Philippine Savings Bank.
The composition of the Holding Firms Index will increase from 20 to 23 with the entry of Alliance Global Group Inc., ATN Holdings Inc., PAL Holdings Inc., and Unioil Resources & Holdings Company Inc., and removal of Alsons Consolidated Resources Inc.
The number of firms in the Industrial Index will inch up to 21 with the addition of Alaska Milk Corp. and TKC Steel Corp.; Property Index to 24 with the inclusion of Philippine Estates Corp. and Vista Land & Lifescapes Inc., while that of the Mining & Oil Index will increase to 17 with the entry of Benguet Corp. and Nihao Mineral Resources International Inc.
The PSE decided in 2005 to conduct a regular free float-based review of the indices as part of a strategic program to entice more companies to expand their ownership and foster more stock market growth.
Criteria
To qualify for inclusion or retention in the prestigious list of PSEi companies, a listed company must satisfy five criteria—free float shares, free float market capitalization, tradability, average daily trading value and volume turnover ratio.
Free float refers to the issued and outstanding shares of a listed company that are not held by strategic partners and owners. Free float shares are freely tradable among non-strategic investors in the public.
As approved by the PSE’s Board of Directors, the free float portion should represent at least 10 percent of the outstanding shares of the listed stock.
To pass the liquidity criterion for the main index, a stock must have an average daily value turnover of not less than P5 million during a period in review to be considered for index inclusion or retention. For the sectoral indices, average daily liquidity must not fall below P1 million during any given period in review.
By tradability, the Exchange means that, during any given period in review, a stock must be traded at least 95 percent of the total trading days to qualify for PSEi inclusion. A lower 75 percent tradability is required for inclusion in any of the six sectors.
The complete composition of the PSEi and sector indices can be accessed in the PSE website at www.pse.com.ph. (PR)
