AirAsia, MMHE likely be removed from the component stocks of main market index


PETALING JAYA: Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and AirAsia Bhd will likely be removed as constituents of the 30 component stocks of the FBM KLCI Index, analysts said.

They may be replaced by Astro Malaysia Holdings Bhd and Felda Global Ventures Holdings Bhd (FGVH), the analysts opined based on the Ground Rules set by the FTSE Malaysia Index Advisory Committee.

The changes should take place during the semi-annual review of the FTSE Bursa Malaysia Index Series on Dec 31, based on Nov 30 closing prices.

The share prices are already reflecting this change. AirAsia touched a new 52-week low of RM2.69 yesterday, while MMHE closed at RM4.46, close to its year's low of RM4.38 on Dec 6.

The new entrants are not exactly outperformers as well, with FGVH closing the day at RM4.60, one of its lowest price since listing at its initial public offering price (IPO) of RM4.55 in June.

Astro continues to trade below its IPO price, closing the day at RM2.97.

“Based on the FBM Ground Rules, a security will be inserted into the FBM KLCI at the periodic review, if its ranking by full market value rises to 25th or above, while a security will be deleted if it falls to 36th or below,” said RHB Research head of equities Alexander Chia.

“Using Nov 30 as the reference date, our simulation exercise shows that Felda Global Ventures (in 22nd position with a market capitalisation of RM16.6bil) and Astro (24th position with a market cap of RM14.9bil) could join as new constituents, with any changes to take effect after the market close on Dec 21,” said HwangDBS Research.

The research house said the two stocks would likely replace AirAsia (36th position with a market cap of RM7.9bil) and MMHE (39th position with a market cap of RM7.1bil), as both counters were relegated in the list following their share price slump.

Separately, HwangDBS pointed out that three other stocks, MISC Bhd (market cap of RM17.9bil), SapuraKencana Bhd (market cap of RM14.2bil) and Nestle (M) Bhd (market cap of RM14bil), failed to gain entry despite being ranked in the top 30 list because they did not pass the liquidity test or did not meet the buffer ruling.

Stocks that are included in the FTSE Bursa Malaysia will typically have a higher following as large investors who want exposure to Malaysia will want their portfolios to mirror the indice.

Large investors and tracker funds, whose portfolios mirror main indices, may make changes. There could be a near-term knee-jerk reaction,” observed one research head.

For instance, MMC Corp Bhd was removed as a component stock of the FTSE Bursa Malaysia KLCI on Aug 1 to make way for newly listed IHH Healthcare Bhd.

The inclusion of the healthcare provider was fast tracked after its listing rather than at the regular December semi-annual review because its market capitalisation was significantly large.

IHH was added to the index with a total share issue of 8.05 billion and an investability weighting of 30%. MMC had a total share issue of 3.04 billion and an investability weighting of 40%.

MMC shares suffered during that time. From the July to Sept, the stock was on a downtrend after its six-month peak of RM2.85 on June 20. It touched a low of RM2.29 on Sept 11. The stock has since rebounded and closed Monday at RM2.70.

Bursa launched the FTSE Bursa Malaysia KLCI on July 6, 2009, making it an indicator of the country's 30 component stocks, down from 100 previously.

The move was to make the main index more appealing to global investors as it would be based on free float or the number of shares available for trading, and liquidity or the ease for investors to buy and sell shares.

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