Top Glove, the world's largest glove maker, has a strong potential to be included in the upcoming November 2018 semi annual review
KUALA LUMPUR: Top Glove Corporation Bhd
and Westports Holdings Bhd are two companies which have the potential to be included in the FBM KLCI under the semi-annual review of the 30-stocks in the index.
MIDF Research said on Tuesday Top Glove, the wold's largest glove maker, has a "strong potential" to be included in the upcoming November 2018 semi annual review.
“While its 18.9% increase in adjusted market cap from mid-June 2018 to end-November 2018 only brought the ranking in terms of market cap up to the 31st spot from the 34th position, Top Glove Corporation’s turnover based on median daily trading volume per month stood above the 0.05% for more than 10 of the 12 months prior to the next review in December.
“Westports is another stock with the possibility to be included in this round of index review due to the: (i) 18.9% increase in market cap value and (ii) positive change in adjusted market cap ranking from the 31st to 25th spot for the period from June 2018 to end November 2018,” it said.
MIDF Research said these criteria will offset the turnover based on median daily trading volume per month which only stood above 0.05% for nine out of the 12 months prior to this December’s index review.
However, MIDF Research said Fraser and Neave Holdings Bhd and Lotte Chemical Titan Holding Bhd had a slim chance of being included in the next review despite their ranking in terms of the adjusted market cap advanced to the 29th and 30th spot as of end November 2018 respectively.
“The reason is that both stocks have a turnover based on median daily trading volume per month on average stood below 0.05% for more than two of the 12 months prior to the next review this December,” it said.
MIDF Research said aside from the stocks under the reserve list, QL Resources Bhd was a strong candidate to advance into the reserve list for the next KLCI review due to its 22.6% jump in adjusted market cap value from mid-June to end-November which pushed its ranking in adjusted market cap from the 39th to 34th spot.
Moreover, QL Resources will also be included into the MSCI Global Standard Index.
Current constituents at risk of exclusion
Based on the change of market capitalisation of the current constituents of the KLCI between June 15 (last rebalancing) and Nov 30, 2018, it found that Genting Malaysia Bhd and Genting Bhd experiencing one of largest declines of 43% and 27% respectively.
“Even in terms of ranking based on adjusted market capitalisation, Genting Malaysia and Genting went down by 11 and four notches to the 33rd and 28th spot respectively between mid-June to 33 in end-November.
“It is notable that both companies have a rather small market cap of RM8.1bil and RM9.9bil while the majority of other components having an unadjusted market cap of above RM10bil.
“Telekom Malaysia Bhd too is another constituent at risk of exclusion on the basis of adjusted market cap ranking as its rank had gone down beyond the 30th spot during the period under review in addition to having the smallest market cap amongst the constituents of only RM6.6bil after facing a 41% drop,” it said.
MIDF Research said if the factor of liquidity was to be added into consideration on top of adjusted market cap rank, Malaysia Airports Holdings Berhad (MAHB) would be one with the highest possibility of being removed from the list.
As the market cap fell by 12% from June to November, the ranking of MAHB based on adjusted market cap went down by three places, from 37 to 40 during the same period.
Volume wise, the volume for MAHB based on its median daily trading volume per month has been below the 0.04% threshold for 12 straight months prior from December 2017 to November 2018.
“Hong Leong Financial Group (HLFG) is another constituent which has the risk of being taken out from the index as its volume based on median trading volume per month has remained below the 0.04% level for 24 months since December 2016.
“Nonetheless, HLFG may be saved by its adjusted market cap ranking which remained at the 18th spot between June 2018 and Nov 18,” it said.
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