The FBM KLCI comprises the Main Board’s largest 30 companies by full market capitalisation. These largest 30 companies resemble the prevailing FTSE Bursa Malaysia Large 30 Index (FBM30) which has been in existence since June 2006.Fund managers and analysts said most, if not all, of the funds had restructured their portfolios over the past six months ahead of the changeover.While liquidity is an important factor, their emphasis would also be on the fundamentals even though some of the other companies have been dropped from the FBM KLCI list. The probable list of the 30 constituents, with ranking based on the free float factor, is topped by Bumiputra-Commerce Holdings Bhd with a weightage of 9.93%, and Public Bank Bhd (weightage of 9.86%). The free float factor of these companies is 100%.
The companies whose free float is 75% (with weightage in the FBM KLCI in parentheses) are Sime Darby Bhd (10.51%), Malayan Banking Bhd (8.7%), Tenaga Nasional Bhd (8.57%), IOI Corp Bhd (6.74%), Genting Bhd (4.9%), Axiata Group Bhd (4.71%), Telekom Malaysia Bhd (2.28%), AMMB Holding Bhd (2.19%), Berjaya Sports Toto Bhd (1.55%) and UMW Holdings Bhd (1.45%).
According to fund managers, the 30 companies will act as a market barometer and are representative of the underlying market while being a more manageable basket and more appealing for product issuers to create market liquidity.
The FTSE Bursa Malaysia index calculation methodology includes free float adjustment and liquidity screens. Free float is share capital freely available for trading. Companies must have at least 15% of free float to be eligible for inclusion. Also, the turnover must be at least 10% of the shares in issue in the last 12 months prior to an annual review
in December.OSK-UOB Unit Trust Management Bhd, which manages the KLCI Tracker Fund, has informed its unitholders the fund will generally invest in the 30 companies in the FBM KLCI. Currently, its funds are invested the 100-stock KLCI components.It has informed the unitholders that they have the right to redeem their unit holdings anytime before the changeover on July 6, if they feel the KLCI Tracker’s objective no longer meets their investment objective.
in December.OSK-UOB Unit Trust Management Bhd, which manages the KLCI Tracker Fund, has informed its unitholders the fund will generally invest in the 30 companies in the FBM KLCI. Currently, its funds are invested the 100-stock KLCI components.It has informed the unitholders that they have the right to redeem their unit holdings anytime before the changeover on July 6, if they feel the KLCI Tracker’s objective no longer meets their investment objective.“You have the right to call for a unitholders’ meeting to consider this changeover,” it said.However, a unitholders’ meeting can only be held if the manager receives notice from at least 50 unitholders or one-tenth of all unitholders of the fund, whichever is lower, according to OSK-UOB Unit Trust Management.
Would the revamp of the FBM KLCI see fund managers focusing on the top 30 companies with the 70 which have been left out becoming less important?
ECM Libra Investment Bank head of equities research, Ching Weng Jin, said it depended very much on the mandates of the funds. “For index-linked funds, the fund managers would have to follow the 30 stocks in the FBM KLCI for benchmarking purposes. “But for performance purposes, there will still be some focus on the other 70 companies. While IJM Corp Bhd, Gamuda Bhd, S P Setia Bhd will not be in the new benchmark, most funds would still be invested in these companies,” he said.Ching added that for foreign funds, they would be driven more by performance. “If it is in either one of the indices, and if it is large and liquid enough, they will invest in those companies which are performing.
“Most times, they follow the MSCI Index,” he added.Another research head expected the changeover to be a non-event as many local funds would rather follow the 100 stocks currently in the KLCI. A local fund manager said many funds were using the FBM100 instead of the current FBM30 as “the latter is too concentrated, while demand for the other 70 stocks is still good”. Another fund manager said there would be some portfolio restructuring. With the FBM KLCI, he said liquidity would be important and “hence, those with single large shareholders may lose out”.
According to fund managers, the 30 companies will act as a market barometer and are representative of the underlying market while being a more manageable basket and more appealing for product issuers to create market liquidity.
The FTSE Bursa Malaysia index calculation methodology includes free float adjustment and liquidity screens. Free float is share capital freely available for trading.Companies must have at least 15% of free float to be eligible for inclusion. Also, the turnover must be at least 10% of the shares in issue in the last 12 months prior to an annual review in December.OSK-UOB Unit Trust Management Bhd, which manages the KLCI Tracker Fund, has informed its unitholders the fund will generally invest in the 30 companies in the FBM KLCI. Currently, its funds are invested the 100-stock KLCI components.It has informed the unitholders that they have the right to redeem their unit holdings anytime before the changeover on July 6, if they feel the KLCI Tracker’s objective no longer meets their investment objective. “You have the right to call for a unitholders’ meeting to consider this changeover,” it said.However, a unitholders’ meeting can only be held if the manager receives notice from at least 50 unitholders or one-tenth of all unitholders of the fund, whichever is lower, according to OSK-UOB Unit Trust Management.Would the revamp of the FBM KLCI see fund managers focusing on the top 30 companies with the 70 which have been left out becoming less important? ECM Libra Investment Bank head of equities research, Ching Weng Jin, said it depended very much on the mandates of the funds.“For index-linked funds, the fund managers would have to follow the 30 stocks in the FBM KLCI for benchmarking purposes.“But for performance purposes, there will still be some focus on the other 70 companies. While IJM Corp Bhd, Gamuda Bhd, S P Setia Bhd will not be in the new benchmark, most funds would still be invested in these companies,” he said.Ching added that for foreign funds, they would be driven more by performance. “If it is in either one of the indices, and if it is large and liquid enough, they will invest in those companies which are performing. “Most times, they follow the MSCI Index,” he added.
Another research head expected the changeover to be a non-event as many local funds would rather follow the 100 stocks currently in the KLCI. A local fund manager said many funds were using the FBM100 instead of the current FBM30 as “the latter is too concentrated, while demand for the other 70 stocks is still good”.Another fund manager said there would be some portfolio restructuring. With the FBM KLCI, he said liquidity would be important and “hence, those with single large shareholders may lose out”.
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