PSE introduces stability mechanisms in index composition

While the composition of the Philippine Stock Exchange Index (PSEi) is unchanged, the PSE will implement effective March 12 two “stability” measures that could alter the index slightly over time.   “To provide stability in the selection of PSEi-member companies, a company shall be inserted in the PSEi if it rises above the 25th position by full market capitalization (MCAP), to replace the company that ranks the lowest,” PSE president Hans B. Sicat said in a statement Wednesday.   But if a company already in the PSEi falls below the 35th position by full MCAP the company in the reserve list that is ranked highest in MCAP will move up to the PSEi, the exchange head said.   The enhancement in PSE policy on the composition of the main index was the result of the regular review that covered trading activity for all of 2011.   Sicat said recent market activity confirms the soundness of the index composition rules and provided a “firmer support for stability and predictability in the index.”   “The rally of the index shows that this composition indeed represents the positive investor sentiment in the market,” he added.   The composition of PSEi was last reviewed in September 2011. — Rouchelle R. Dinglasan/ELR, GMA News