PSE, 2 others to join main stock index by Nov

MANILA, Philippines - The Philippine Stock Exchange (PSE) will join the elite roster of blue-chip stocks in the benchmark PSE index (PSEi), along with re-entrants DMCI Holdings Inc. and Security Banking Corp., next month.

In a statement, the PSE said these adjustments mark the latest revamp of the main composite index which consists of the country’s 30 most traded, liquid and capitalized firms.

These changes will take effect on Nov. 3 following a review conducted by the PSE from July 2008 to June 30 this year.

The PSE joins other listed bourses abroad such as Singapore Exchange, Hong Kong Exchanges and Clearing Ltd. and Australian Securities Exchange, that form part of their main stock market indices.

DMCI and Security Bank have been stricken off the PSEi in May 2008 and November 2007, respectively.

“This recent review follows the same objective criteria for inclusion in the PSEi which we have set out in 2006. The need to recompose the members of the index becomes more relevant in light of the financial crisis that has impacted the landscape of trading in the market,” said PSE president and chief executive officer Francis Lim.

On the other hand, to be removed from the main composite index or the PSEi, which is considered the local market’s key barometer, are Vista Land and Lifescapes Inc., Rizal Commercial Banking Corp. and ABS-CBN Broadcasting Corp.

Listed companies included the PSEi have to satisfy five criteria: the free float level, liquidity, volume turnover, tradability and free-float market capitalization. The free-float capitalization and liquidity requirement were introduced in 2006.

The number of member-companies in all six sectoral indices has been trimmed to 18 with the inclusion of two new companies — Metro Pacific Investments Corp. and Apex Mining Co. Inc. — in the holding firms and mining and oil indices, respectively.

“The reduced number of members in the sector indices primarily reflects the slowdown in market trading during the review period,” Lim explained.

Free float, also known as public float, refers to the portion of the outstanding shares that are freely available and tradable in the market, or those shareholdings, which are non-strategic in nature.

The free float portion should represent at least 10 percent of the outstanding shares of a listed stock.

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

The volume turnover criterion prescribes that the total volume of shares traded must be at least 10 percent of the company’s free float shares.

To meet the tradability criterion, a company must be traded at least 95 percent of the days that its shares are eligible for trading.

Free float market capitalization is computed using the volume weighted average price of a listed stock during a particular review period. Companies that pass the first four criteria are ranked from highest to lowest based on free float-adjusted market capitalization.