PETALING JAYA: The MSCI Malaysia Index, an important benchmark of large and mid-cap stocks for exchange traded funds and mutual funds that invest in the country’s stock exchange, will have three stocks added to it at the end of this month.
The MSCI Malaysia Small Cap Index, an index tracking small-capitalised stocks, will also see four new constituents being added, while seven others will be removed. The changes come as part of the semi-annual review of the MSCI Equity Indexes.
As of October, the MSCI Malaysia Index, which covers 85% of the Malaysian equity universe, had 41 constituent stocks while the MSCI Malaysia Small Cap Index, which covers 14% of the Malaysian equity universe of small-cap stocks, had 73. Changes to the indexes usually see funds that track them making changes to their portfolio.
Nestle (M) Bhd, Press Metal Aluminium Holdings Bhd and SP Setia Bhd will be added to the MSCI Malaysia Index. Eco World International Bhd (EWI), George Kent (M) Bhd, Hengyuan Refining Co Bhd, as well as Petron Malaysia Refining & Marketing Bhd will be on the MSCI Malaysia Small Cap Index.
Several counters reacted positively to the news, with Nestle hitting a new high of RM94.84 in the first hour of trading and closing 3% higher at RM91.30.
SP Setia closed 5.2% higher at RM3.42, while George Kent closed 2.2% higher at RM3.26.
The seven stocks to be taken off the MSCI Malaysia Small Cap Index are CB Industrial Product Holding Bhd, Jaya Tiasa Holdings Bhd, JCY International Bhd, Media Prima Bhd, Prestariang Bhd, Tropicana Corp Bhd and Tune Protect Group Bhd.
Fortress Capital Asset Management director Geoffrey Ng said the inclusion of refiners Hengyuan and Petron as well as property developers SP Setia and EWI “is due to their relative size in terms of value within the local market” and does not take into account the subdued outlook for the oil and gas, and property industries.
“The MSCI methodology for including or excluding stocks is driven primarily by variables such as market capitalisation, free float and governance index, and not decided based on market sentiment towards a sector or company,” he pointed out.
Ng added that Fortress Capital’s portfolios do not rebalance according to index changes, as the management has an active and non-index-linked strategy.
Meanwhile, Areca Capital Sdn Bhd chief executive officer Danny Wong said the new counters to be added to the indexes do not indicate an automatic buy call or a recommendation to buy.
“The stock is just qualified to be a constituent of a particular index.
“In fact, there are companies on the list whose financial results have been lacklustre, but should see a turnaround in the coming quarters,” said Wong.
A new constituent to an index could be representative of good exposure in a certain sector.
Stocks added to the indexes could also be traded at a higher premium due to the wider exposure gained.
Regionally, Indonesia saw one addition and three deletions to the MSCI Indonesia Index, while its MSCI Indonesia Small Cap Index had seven additions and seven deletions.
Over in Thailand, there were no additions to the MSCI Thailand Index, although there was one deletion. As for the MSCI Thailand Small Cap Index, there were five additions and six deletions.