PSE tweaks main index basket: Acen, Converge in, DMCI, Emperador out

The Ayala group’s renewable energy platform AC Energy Corp. (Acen) and leading fiber internet services provider Converge ICT Solutions Inc. are set to debut on the main stock barometer, Philippine Stock Exchange index (PSEi), effective on Aug. 16.

These two companies will replace Consunji-led conglomerate DMCI Holdings and liquor-maker Emperador Inc. in the 30-member basket of the country’s largest, most valuable and most liquid companies, based on the results of the latest PSEi rebalancing review.

With a market capitalization of P324.15 billion, the entry of Acen into the PSEi had been widely expected by the market. On the other hand, the inclusion of Converge, currently valued by the market at P179.9 billion, came quite a surprise for some given that it had been trading in the PSE for less than 12 months. Converge listed just last Oct. 26, 2020.

In terms of trading volume, however, Converge has been among the market favorites since listing on the stock exchange.

The Philippine Stock Exchange (PSE), for its part, implemented during this latest index review a new rule providing for early inclusion of companies that could comply with specific size and liquidity criteria.

Based on the amended rules on insertions and removals, a company may be included in the PSEi if it ranks 25th or higher. Conversely, it will be excluded if it ranks 36th or lower in terms of full market capitalization.

To quality for the PSEi, the free float level of a company should be at least 15 percent and it must rank among the top 25 percent in terms of median daily value in nine out of the 12 months in review.

‘Cream of the crop’

The PSE announced further changes in its index policy for the index review in December 2022. Specifically, the free float requirement will be increased to 20 percent from 15 percent.

As passive investing, or the strategy of tracking a basket of assets or an index instead of actively buying or selling stocks, is gaining traction, the rebalancing of the PSEi is closely followed by investors. The 30 members of the PSEi are considered the cream of the crop in the equities market.

Acen’s attributable energy output rose by 16 percent in the first half of 2021 to 2,224 gigawatt-hours, driven by increased operational capacity from acquisitions and new power plants, as well as recovery in Luzon power demand in May and June. This output exceeded its prepandemic levels.

Acen’s renewables portfolio doubled to 2,070 megawatts in June 2021. With the infusion of international assets, renewables now comprise 80 percent of its capacity. Furthermore, it has over 1,000 MW of attributable capacity under construction, with over half of the projects expected to be operational within the next six to 12 months.

For its part, Converge’s network has already reached more than 7.1 million homes nationwide as of end-March. It is on track to reach its target to cover about 55 percent of households in the Philippines by 2025.