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THE 30 constituent stocks of the widely watched Straits Times Index (STI) will remain unchanged after a half-yearly review.
The STI is one of the indexes in the FTSE ST Index series owned by Singapore Press Holdings, the Singapore Exchange and Britain's FTSE Group. The regular reviews aim to ensure the STI and the other indexes accurately reflect the market.
In the previous review, in March, property developers Yanlord Land and Keppel Land were dropped from the STI and replaced by ComfortDelGro and SMRT.
STI component stocks are ranked based on market value, after they have met the criteria for free float - the proportion of shares available to be traded freely - and liquidity, or how frequently they are traded. Despite the recent sharp rebound in property counters, Keppel Land and Yanlord Land failed to get back on the list.
To re-qualify for a place, the ousted stocks need to fall within the top 20 based on market value. They are being placed in the STI reserve list, which also includes Ascendas Real Estate Investment Trust, Singapore Petroleum Company and Yangzijiang Shipbuilding. Companies in this list will replace any constituent stock that becomes ineligible as a result of corporate actions before the next review.
The status quo did not surprise market observers. While shares of Keppel Land and Yanlord had rallied 8.2 per cent and 5.5 per cent respectively this week, DMG Research head Terence Wong said these gains were more likely due to the upbeat sentiment among property counters than the expectation of them returning to the index.
The executive chairman of boutique corporate finance firm NRA Capital, Mr Kevin Scully, said the status quo is good news.
'The market is on a rebound and we need to see which sectors reflect the market and economy better. Markets are in that recovery phase so it will be rather premature to change (the constituent stocks),' he said.
Too frequent changes will also make it difficult for investors to benchmark performance, he said. There are, however, some major reshuffles in other indexes. In what some industry observers consider a surprise move, Hongkong Land was included in the two China indexes, the FTSE ST China Index and the FTSE ST China Top Index, while Chinese shipbuilder Yangzijiang was dropped from both indexes.
One observer pointed out that Yangzijiang might have failed to qualify because of its revenue source. To be eligible for inclusion in the two China-themed indexes, a listed company must meet two additional criteria - have at least 30 per cent ownership by the Chinese government or companies, and derive at least half of its revenues from mainland China.
According to data compiled by Bloomberg, the bulk of Yangzijiang's revenue comes from Europe. The firm has a number of European clients, including Hansa Shipping, D'amato, Carisbrooke and IMS Shipping.
To get the full lists, go to www.sgx.com
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