Following the semi-annual review of the FTSE Bursa Malaysia Index Series yesterday, TM and KLCC will replace MAHB and AMBANK in the FBM KLCI as expected. Having passed the liquidity test in this review period, KLCC is re-admitted into the Series after an 18-month long absence. Hence, it is back not just to the FBM KLCI but it also returns to, among others, the FBM Emas Shariah Index. On the contrary, UMW was excluded from all the index series, having failed the liquidity test. All constituent changes are to take effect at the start of business on Monday, 22 June.

Constituent changes to take effect at the start of business on Monday, 22 June: The indices will be rebalanced based on prices at the close of Friday 19 June. But based on current prices and with TM included, we estimate the Telecommunications sectors weight to increase from 10.7% to 12.4%. And as REIT and Banks subsectors both come under Financials according to FTSE Russell’s ICB Sector breakdown, the Financials sector should see a marginal increase in weight given that KLCC is larger than AMBANK which it is replacing. The FBM KLCI reserve list, comprising the five highest ranking non-constituents by market capitalisation will be QL, WPRTS, F&N, KOSSAN and GAMUDA. The reserve list will be used in the event one or more constituents are deleted from the FBM KLCI in accordance with the ground rules during the period up to the next semi-annual review.

KLCC returns to several indices in the series: Because KLCC passed the liquidity test in the current review (where it has to turn over at least 0.05% of its free floating shares measured by its median daily trading volume per month for at least 10 of the past 12 months) other indices which it qualifies for inclusion besides the FBM KLCI are the FBM EMAS, FBM100 and FBM Emas Shariah Index. However, it remains excluded from the FBM Hijrah Shariah Index. On the contrary, UMW was dropped from the Index series for failing the liquidity test in this review period. Hence, it will be out of the FBM100, FBM EMAS. FBM 70, FBM Emas Shariah and FBM Hijrah Shariah indices.

FBM Hijrah Shariah Index sees 3 inclusions replacing 3 exclusions: Included in this index areDIGI, SUPERMX and MYEG which replace SPSETIA, AIRASIA and UMW. Making it into the reserve list for this index are INARI, SCIENTX, SIMEPROP, VITROX and KPJ.

Other notable movements: Having been excluded from the FBM KLCI, both AIRPORT and AMBANK join the FBM70, along with AXREIT which moved up from FBM Small Cap index. And, among the 12 stocks which were newly classified as SC Shariah-compliant securities last week, only PENTA and INNATURE made it into the FBM Emas Shariah Index as they passed both the free float and liquidity tests.

Source: Kenanga Research - 5 Jun 2020