THE five companies selected for inclusion as component stocks on the KLSE Composite Index (CI) today clearly mirror the defensive preference of the investing community in the midst of volatile market conditions.
Bintulu Port Holdings Bhd, Carlsberg Brewery Malaysia Bhd, JT International Bhd, Malaysian To- bacco Company Bhd (into which Binariang Satellite Systems is injected) and MBM Resources Bhd have been selected for inclusion in place of Daiman Development Bhd, DNP Holdings Bhd, Europlus Bhd, Kumpulan Emas Bhd and Palmco Holdings Bhd.
“Given the current lacklustre market, these new component stocks with high yields are regarded the flavours of the month among investors,” said Avenue Assets Bhd chief executive officer Tan Jin Teik .
These stocks had been chosen to better reflect what investors were looking for, he added.
On some of the stocks that have been excluded, Tan said: “The property market is soft at the moment and volume traded on companies like Daiman and Europlus has been low. The reduction in trading volume for this particular sector (property) is not conducive to the index.”
Although the five new stocks in the CI do not have large paid-up capital compared with some others in the index, they have a relatively good following.
“The institutional tracker funds may have to adjust their portfolios. However, I do not see that they are necessarily a must-have in their funds’ portfolio, “ Tan said, adding that tracker funds generally tracked only one third of the stocks in the CI.
An analyst from a local research house told StarBiz that asset management funds which had tracker funds would be more inclined to look at these stocks.
However, the tracker funds in Malaysia are quite small, with about seven to eight unit trust funds tracking the CI.
He said that the inclusion of these five new stocks in the index also reflected the focus on manufacturing and services, targeted to be the new engine of growth for the economy.
The new additions to the CI are not expected to generate much interest at the moment due to lacklustre market sentiment.
“If the market is active, then yes, the new additions will certainly spark much interest. Currently, even the bigger cap stocks are not generating much interest,” she noted, adding that there was not much new money going into equities now, and investors were going into bonds instead.
As for those stocks that have been taken out, a local fund manager does not expect much impact on the prices of the stocks taken out from the CI.
Profit-wise, the five new stocks have registered healthy pre-tax profits: MBM (RM155mil for full FY ended Dec 31, 2002); Carlsberg (RM126.8mil for FY ended Dec 31, 2002); Bintulu Port (RM103.4mil for FY ended Dec 31, 2002); JTI (RM69mil for FY Dec 31, 2002) and for MTC whose stock has been suspended since July 17, 2002, pre-tax profit for FY ended Dec 31, 2002, was RM21.5mil.