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ABS-CBN, Vista Land, RCBC stricken off bourse index

10/23/2009

Shares of the Philippine Stock Exchange Inc. (PSE), DMCI Holdings Inc. and Security Bank Corp. will join starting next month the basket blue chip stocks that comprise the PSE index, which is used as benchmark for the market.

The three companies will replace Vista Land and Lifescapes Inc., Rizal Commercial Banking Corp. and ABS-CBN Broadcasting Corp.

This would mark the first time that the PSE will be included in the main index. PSE joins other listed exchanges such as Singapore Exchange, Hong Kong Exchanges and Clearing Ltd. and Australian Securities Exchange, among exchanges that currently form part of their main stock market indices.

The changes, which will take effect on Nov. 3, followed the PSE’s regular review of its main and sectoral indices for the trading activity from July 1, 2008 to June 30, 2009.

Meanwhile, DMCI Holdings and Security Bank will return as PSEi members after being removed during the May 2008 and November 2007 index recomposition, 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,” PSE president Francis Lim said.

Among sectoral indices, all six sectors shall have fewer member-companies by a total of 18 firms. Only two companies will be added to the six sector indices. Metro Pacific Investments Corp. and Apex Mining Co. Inc. will become new members of 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 said.

The PSEi, which is a basket of select 30 stocks, requires a listed company to satisfy five criteria, the free float level, liquidity, volume turnover, tradability and free float market capitalization, to be included in it.

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.

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. The top 30 in terms of free float market capitalization are included in the PSEi.