PSE changes 30-firm composite index after thorough review

Following a comprehensive review of listed companies, the Philippine Stock Exchange (PSE) is reconstituting its 30-company composite index to enhance the value of stocks and promote more liquidity in the market.

Two companies – cement manufacturer Holcim Philippines Inc. and mobile phone services provider Pilipino Telephone Corp. will be removed from the roster of the main index starting April 3. They will be replaced by Empire East Land Holdings Inc., the low-to-middle housing subsidiary of Megaworld Corp., and Manila Mining Corp.

According to the PSE, Piltel and Holcim lost their slots in the stock market’s main barometer for failing to meet the "free float" method and other criteria that determine the composition of the index, renamed as PSEi.

The PSEi serves as the barometer of stock price movement in the exchange. Inclusion in the basket of PSEi stocks, as well as in the six sub-sectors, carries prestige as these stocks dictate the overall movement of the indices.

PSE president and chief executive Francis Lim said the exclusion and inclusion of companies were determined using five criteria that dealt on a listed firms’ free float shares, tradability, turnover and market capitalization and volume turnover ratio.

In the computation of the old PSE composite index or the Phisix, the PSE used only four criteria – full market capitalization, liquidity, tradability, and sector representation.

Lim emphasized that "PSE officials do not have a leeway to include or exclude a stock for the PSEi and the six sectors outside of the set of criteria. Stocks that do not pass any of the criteria are automatically excluded from the component stocks."

Others affected by the review are Bacnotan Consolidated Industries Inc., which will be removed from the holdings firms sector for failing to trade at least 75 percent of the time during the review period, and Macroasia Corp., which will be deleted from the services sector for failing the tradability yardstick.

Abra Mining & Industrial Corp. was dropped from the oil sector for also failing to meet the tradability standard.

On the other hand, Semirara Mining Corp., the coal concern of the Consunji family, gained a slot in the mining sector after meeting new standards.

Robinsons Land Corp., the property unit of Gokongwei flagship firm JG Summit Holdings Inc., was also included in the list of companies comprising the properties sector.

EEI Corp.,Trans-Asia Oil & Energy Development Corp. and Universal Robina Corp. likewise gained slots in the industrial sector.

The composition of the financial sector remains unchanged, according to the PSE.

Lim said these changes will be reviewed after six months.

Free float refers to the issued and outstanding shares of a listed company that are not held by strategic partners and owners. As approved by the PSE board, the free float portion should represent at least 10 percent of the outstanding shares of the listed stock.

In order to pass the liquidity criterion, a stock must have an average daily value turnover of not less than P5 million during a period in review to be considered for index inclusion or retention.

By tradability, the PSE means that, during any given period in review, a stock must be traded at least 95 percent of the total trading days to qualify for PSEi inclusion. A lower 75-percent tradability is required for inclusion in any of the six sectors.