What is KLCI

KLCI represents the FTSE Bursa Malaysia KLCI, which comprises the 30 largest listed companies by market capitalization in the Malaysian stock market. This index is highly representative, and its performance typically reflects the overall direction of the Malaysian market.

Investors, analysts, and even international institutions often use the trend of this index as one way to assess the country's overall economic condition.

Source: Bursa (Update on 18 December 2023)

What is Mid 70

Mid 70 represents the FTSE Bursa Malaysia Mid 70 Index, which includes the 31st to the 100th largest market capitalization companies in the Malaysian stock market. Therefore, when combined with the FTSE Bursa Malaysia KLCI, these two indices represent the top 100 largest listed companies in Malaysia by market capitalization. Following the FTSE Bursa Malaysia, Mid 70 is the FTSE Bursa Malaysia Small Cap Index.

Source: Bursa (Update on 18 December 2023)

Industry Classification Benchmark

Source: FTSE Russell

Which stocks are eligible for inclusion in FTSE Bursa Malaysia Index Series?

All classes of ordinary shares currently in circulation are eligible for inclusion in the FTSE Bursa Malaysia Index Series, provided they comply with all other eligibility criteria, including free float and liquidity, as specified in the FTSE Bursa Malaysia Ground Rules.

Regarding the FTSE Bursa Malaysia Index Series, any security listed on Bursa Malaysia and traded on its trading system is regarded as Malaysian in terms of nationality. Thus, it qualifies for inclusion in the FTSE Bursa Malaysia Index Series, assuming it meets all other eligibility requirements.

The KLCI index isn't a fixed list; it changes every six months based on market performance. The FTSE Bursa Malaysia Index Consultation Committee regularly assesses companies in the market and adjusts the index constituents using metrics like market capitalization. Ultimately, whether a company joins or leaves the KLCI depends on market dynamics, not a one-time decision.

Free Float

The FTSE Bursa Malaysia Ground Rules employ specific weighting methods in index calculation, categorizing companies based on certain proportions. This aims to avoid excessive adjustments of investment portfolios.

Furthermore, for a company to qualify for inclusion in the index, it must have at least 15% of its shares available for free trading in the market. This requirement helps ensure that companies included in the index possess adequate float to maintain market efficiency, liquidity, and fairness. Consequently, stocks within the KLCI can freely trade in the public market.

Free float refers to share capital available for trading without restrictions. Various types of restricted shareholdings are excluded from calculating a company's free float:

• Trade investment in an index constituent by another constituent (cross-holdings) or a non-constituent company or entity.
• Significant long-term holdings by founders, their families, and/or directors.
• Restricted employee share schemes.
• Government holdings.
• Portfolio investments are subject to a lock-in clause for the duration of the clause.

Conversely, the following are not considered restricted shareholdings:

• Portfolio investments.
• Nominee holdings, including those supporting ADRs & GDRs, unless they represent restricted free float as defined above.
• Holdings by investment companies.

Liquidity

Securities must meet a minimum turnover requirement of shares, as stipulated in the FTSE Bursa Malaysia Ground Rules. This criterion applies after the application of any free float restrictions and pertains to the twelve months preceding an annual review held in December by the FTSE Bursa Malaysia Advisory Committee. Compliance with this turnover prerequisite is necessary for a security to qualify for inclusion in the indexes.

A security failing the liquidity test and subsequently excluded will remain excluded from all other indexes until the next December review.

What is the role of the KLCI & Mid 70 Index?

1. Assessing the Overall Market Performance

FTSE Bursa Malaysia Top 100 Index covers the largest 100 companies by market capitalization in Malaysia, essentially representing the most influential and powerful enterprises in Malaysia. Therefore, through this index, we can comprehensively understand the overall performance of the Malaysian market. All positive or negative data changes ultimately manifest directly in this index.

2. International Funds Assessing Malaysia's Economic Indicators

For international funds looking to invest in the Malaysian market, gathering market intelligence can often be a challenging task. Therefore, directly analyzing the FTSE Bursa Malaysia Top 100 Index might be the simplest approach. By using the FTSE Bursa Malaysia Top 100 Index as a primary analytical tool, not only can a significant amount of time and money be saved, but it also allows for more efficient identification of investment opportunities.

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