UnionBank shares plunge, Nickel Asia rallies on off-cycle PSEi rebalancing
MANILA -Aboitiz-led Union Bank of the Philippines, one of the country’s biggest lenders, saw its share price fall on Friday as the Philippine Stock Exchange announced its removal from the 30-member PSE index (PSEi) following a revision in the rules on government pension funds’ holdings.
The PSE said UnionBank would be replaced by Zamora-led Nickel Asia Corp. in the PSEi, which is composed of the country’s largest and most actively traded stocks and is regularly reviewed and revised by the bourse.
UnionBank shares plunged by as much as 12 percent on Friday before closing the session down 8.8 percent to P64.50 per share while Nickel Asia rallied 13.33 percent to P6.12 each.
The removal of UnionBank just eight months after it joined the PSEi was an off-cycle change that caught many brokers and investors by surprise.
It came in the wake of recent revisions to the classification of shares held by state funds such as the Social Security System (SSS) and Government Services Insurance System, which are important investors in the Philippine stock market.
The new rules, proposed by the PSE last Aug. 25, stated that shares of pension funds, which are usually classified as public shareholdings below a certain size, will be reclassified as non-public if the fund a a board seat in the company.
This classification is important in calculating the public float or the portion of a listed firm’s shares that can be freely traded by the public and are not held by the insiders such as major stockholders, directors, or officers.
SSS, which owns nearly 10 percent of UnionBank, has two directors on the bank’s board: SSS president and CEO Rolando Macasaet and SSS commissioner Robert Joseph M. De Claro.
Because SSS’ shares were classified as nonpublic, the public float of UnionBank suddenly fell below 20 percent—which is the minimum amount that is required for PSEi inclusion.
The PSE said on Thursday UnionBank will also be removed from the PSE dividend yield and financial subindices.
“The said adjustment was made based on further determination by the exchange that a number of shares reported by [UnionBank] as public should be classified as non-public, in accordance with section 2.2 of the PSE policy on index management and consistent with the treatment of such shares that are similar in nature,” the PSE said.
“[UnionBank] remains well above the 10 percent minimum public ownership requirement for continuing listing,” it added.
In a statement on Thursday, UnionBank said there was no change in its ownership structure and its removal was due to the reclassification of the SSS shares.
“When the PSE included UnionBank in the Philippine Stock Exchange Index (PSEi) last February 2023, its public float, inclusive of SSS shares, was 35 percent,” the banking giant said.
“SSS shares were classified as public because SSS is mandated under its charter to invest the funds of its members in publicly listed companies. The size of their investment in UnionBank gave them the right to hold seats in the bank’s board,” it said.
“UnionBank, however, remains listed and actively traded on the Philippine Stock Exchange,” it added.
The development also came days after the PSE completed another off-cycle index revision. Aboitiz-led Aboitiz Power Corp. and tycoon Manuel V. Pangilinan-led Metro Pacific Investments Corp. were removed from the PSEi, replaced by billionaire Enrique Razon Jr.’s Bloomberry Resorts Corp. and the Po family-led Century Pacific Food Inc.