Following the final semi-annual review of the FTSE Bursa Malaysia Index Series for 2020 yesterday, SUPERMX (OP; TP: RM12.00) will replace KLCC (OP; TP: RM8.20) in the FBMKLCI as expected. All constituent changes are to take effect at the start of trading on Monday, 21st December based on price closings on Friday, 18th December. Notably, UNISEM (OP; TP: RM5.15) re-enters the FBM70 and FBM EMAS Shariah on passing the liquidity test. Dropped from the index series are SUNCON (OP; TP: RM2.45), PANTECH (UP; TP: RM0.310) and UZMA (OP; TP: RM0.640).

Constituent changes to take effect at the start of trading on Monday, 21st December: The indices will be rebalanced based on price closings of Friday, 18th December. Based on today’s closing prices with the assumption that SUPERMX’s index shares to be represented in the FBMKLCI is similar to the current number of 1,618.75m represented in the FBM100, it should enter at around 2.7% weight, dislodging KLCC, currently weighted at 0.66%.

Rubber gloves sector estimated to make up 13.5% by weight: With the latest changes, the rubber gloves sector will be represented by three constituents – TOPG, HARTA and SUPERMX – making up an estimated 13.47% weight based on current prices, up from 10.99%.

Marginal upside to FBMKLCI’s FY21 EPS with the changes:SUPERMX’s entry should likely increase the FBMKLCI’s FY21 EPS as its earnings contribution is expected to exceed that of KLCC. After accounting for the dilutive impact of a higher divisor, we estimate the rebalancing would still potentially enhance EPS by around 2%.

Of note are the entry of UNISEM into the FBM70 and FBM EMAS Shariah. We believe that UNISEM is a case of reentry into the FBM Index series on passing the liquidity test during this review round. On the contrary, we believe that liquidity issues were the reasons SUNCON, PANTECH and UZMA were dropped from the series. Due to diminished market capitalisations, AEON (OP; TP: RM1.00), ECOWLD (OP; TP: RM0.490) and KERJAYA (OP; TP: RM1.25) were moved from FBM70 to FBMSC.

The FBM Hijrah Shariah Index sees 2 inclusions replacing 2 exclusions:Included in this index are PETDAG(UP; TP: RM16.00) and INARI (OP; TP: RM3.14) replacing SERBADK (OP; TP: RM2.70) and FGV (MP; TP: RM1.25). Making the reserve list here are VITROX(NR), SCIENTX(MP; TP: RM10.00), MALAKOF (OP; TP: RM1.15), and VSIND (NR).

Source: Kenanga Research - 4 Dec 2020