No change in PSE index

MANILA, Philippines—The Philippine Stock Exchange has kept the same roster of 30 companies comprising the main local stock market benchmark after the latest of twice-a-year index review.

“The rules we have adopted last year pertaining to the management of the index provide firmer support for stability and predictability in the index. The rally of the index shows that this composition indeed represents the positive investor sentiment in the market,”  Hans Sicat, PSE president and chief executive officer said in a press statement late Wednesday.

This decision was based on the PSE’s regular review of the index that covered trading activity for the period January to December 2011. Prior to this review, the last recomposition of the index was on Sept. 12, 2011.

Some investors were hoping that some of the market’s favorites in 2011, like Lepanto Consolidated Mining, would make a comeback to the PSEi especially after the mining stock was included in the MSCI small-cap index in November last year.  Lepanto was removed from the local index in September last year.

A local equity fund manager said his company’s simulation based on the PSE’s criteria anticipated that Lepanto won’t be reinstated yet but said its inclusion may be possible during the next index review in September.

The following companies comprise the PSEi: Ayala Corp., Aboitiz Equity Ventures, Alliance Global Group Inc., Ayala Land Inc., Aboitiz Power Corp., BDO Unibank, Belle Corp., Bank of the Philippine Islands, Cebu Air, DMCI Holdings, Energy Development Corp., First Gen Corp., Globe Telecom, International Container Terminal Services Inc., Jollibee Foods Corp., JG Summit Holdings, Metropolitan Bank & Trust Co., Megaworld Corp., Manila Electric Co., Metro Pacific Investments Corp., Manila Water Co. Inc., Philex Mining Corp., Robinsons Land Corp., Semirara Mining Corp., SM Investments Corp., San Miguel Corp., SM Development Corp., SM Prime Holdings, Philippine Long Distance Telephone Co. and Universal Robina Corp.

To be included on the PSEi, a listed company must satisfy three criteria:  the free float level, liquidity and full market capitalization.

Free float, also known as public float, refers to the portion of the outstanding shares that are freely available and tradable on the market, or those shareholdings, which are non-strategic in nature. The free float portion should represent at least 12 percent of the outstanding shares of a listed stock.

In order to pass the liquidity criterion for the main index, a stock must be among the top 25 percent by median daily value turnover per month for at least nine out of 12 months.

Full market capitalization refers to companies that pass the first two criteria and are ranked from highest to lowest based on volume-weighted average price during the review period.

In selecting companies that will comprise the sector indices,  common stocks of the company must rank among the top 50 percent in terms of median daily trade per month in eight out of the 12 month period in review.

Among the enhancements adopted by the PSE for its index management are new rules for “insertions and removals” (Section 3.2), in turn intended to provide stability in the selection of PSEi-member companies.

Under the rules, a company shall be added to the PSEi if it rises above the 25th position by full market capitalization, to replace the company that ranks the lowest. The same section provides that a company will be taken off the PSEi if it falls below the 35th position by full market cap and replaced by the company with the highest market cap among those included on the reserve list.