PSE revises index series requirements

The Philippine Stock Exchange (PSE) is revising its policy on managing the PSE Index Series effective September. The revision is expected to enhance the quality of the PSE’s indices, reflect corporate actions in a timely manner, as well as elevate index standards to international best practices. The PSE Index Series consists of the PSEi, six sector indices and the All Shares Index. “The revision should enhance investor confidence and at the same time, challenge our listed companies to make their shares more attractive to investors," said Hans B. Sicat, PSE president and chief executive officer, in a statement on Tuesday. Under the amended policy, companies should meet three revised criteria to qualify under the PSEi. First, the company’s free float level should be at least 12 percent which is an increase from the current 10 percent. Secondly, the company must rank among the top 25 percent in terms of median daily value in nine out of the twelve-month period in review, from the current P5 million average daily value criterion. Thirdly, the ranking of qualified companies should be based on full market capitalization instead of float market capitalization. The ranking shall no longer consider the sector representation of companies and shall treat eligible companies equally. Currently, final selection of companies is done in two stages. Initially, the two highest-ranked companies from each of the six sectors fill the first 12 slots to ensure sector representation. The remaining slots will then be occupied by the 18 highest-ranked companies from among the other qualifiers. To be eligible for the sector indices, common stocks of the company must rank among the top 50 percent in terms of median daily trade per month in eight out of the twelve-month period in review. The index recomposition periods will also be moved to March and September yearly from the current May and November schedules. Other notable changes to the index policy include the creation of a Reserve List to be used in the event that one or more constituents are deleted from the PSEi; stricter rules for insertions and removals to provide stability in the index selection process; and additional provisions to better reflect the effectiveness of the PSEi as a market indicator. The move to update its index management practices follows the PSE’s latest index review that will take effect on May 9, with Security Bank Corp. joining the PSEi in place of China Banking Corp. In a recent memorandum, the PSE announced that the recomposition follows a regular review of its main and sectoral indices for trading activity from January to December 2010. “This recent review follows previously approved objective criteria. We are pleased to note that 62 companies have qualified for inclusion in the PSEi, higher than the 58 companies that qualified in the previous review. This reflects renewed investor confidence, mainly due to improvements in corporate governance among listed firms," Sicat said. The companies added to the sectoral indices are: Integrated Micro-Electronics Inc., Republic Cement Corporation and San Miguel Brewery Inc. for the Industrial Index; Anglo Philippine Holdings Corporation and South China Resources, Inc. for the Holding Firms Index; Polar Property Holdings Corporation for the Property Index; Leisure & Resorts World Corporation for the Services Index; and Apex Mining Company, Inc., Atok-Big Wedge Company Inc. and United Paragon Mining Corporation for the Mining & Oil Index. “The higher number of members in the sector indices primarily reflects increased interest in our local firms, as trading activity across the market continues to improve," Sicat said. -- CMA/OMG, GMA News