PSE set to implement adjustments to indices

By Revin Mikhael D. Ochave, Reporter

THE Philippine Stock Exchange, Inc. (PSE) will implement changes to its indices on Feb. 5, affecting the industrials, holding firms, property, services, PSE MidCap, and PSE Dividend Yield (DivY) indices, while the PSE index, financials, and mining and oil sectoral indices remain unchanged.

Changes, in line with the PSE’s index management policy, were made following a review based on trading activity in 2023, according to a document dated Jan. 26 posted on the PSE’s website.

In the industrial index, Ionics, Inc., and Shakey’s Pizza Asia Ventures, Inc. were added, while Axelum Resources Corp. and Phinma Corp. were removed.

Lopez Holdings Corp. was removed from the holding firms sectoral index.

Construction firm D.M. Wenceslao & Associates, Inc. and property developer Shang Properties, Inc. were the new additions to the property sectoral index.

The services sectoral index saw the inclusion of 7-Eleven operator Philippine Seven Corp., with exclusions including DFNN, Inc., Medilines Distributors, Inc., and Harbor Star Shipping Services, Inc.

In the PSE’s DivY index, China Banking Corp. and Synergy Grid & Development Phils., Inc. joined, while Aboitiz Equity Ventures, Inc., and GMA Network, Inc. were removed.

The PSE’s MidCap index included Petron Corp. and excluded Filinvest REIT Corp.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet said: “The review of the various PSE indices are intended to ensure that they maintain their quality as reliable benchmarks of stock market performance.”

“They are important to many institutional investors who create funds on the basis of such indices as well as to active investors who measure alpha or their ability to outperform the relevant indices,” he said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a separate Viber message that the review helps the investing public make better trading decisions.

“The changes may reflect the recent realities, especially in terms of trading activities, in terms of daily volumes and how often the shares are traded, free float, among others to help guide the investing public, both local and foreign investors,” he said.

Meanwhile, the PSE also introduced an amendment to determine a company’s free float under its policy on index management.

Under the amendment, shares held by pension funds and government-run social security funds, such as the Social Security System and Government Service Insurance System, are now generally considered free float. Their shares are only treated as non-free float if the fund has a board seat in a company.

The PSE said the amendment seeks to “provide more clarity regarding the shares held by pension funds for strategic purposes.”

Free float, also called public float, refers to the portion of the outstanding shares that are freely available and tradable in the market, or those shareholdings that are non-strategic in nature.

The PSE requires that a company’s public float should be at least 20% of its outstanding shares at the end of the 12-month period in review.

According to Mr. Colet, the move is a “much-needed clarification” that eliminates ambiguity in the provision.

“Under the old rule, the pension funds’ shares were excluded from the free float if they were intended to exercise control over the company. The PSE has now made it more clear-cut by stating it is the fact of having a board seat that will exclude the pension funds’ shares from the free float,” Mr. Colet said.

“This will give pension funds the flexibility to build stakes of less than 10% without affecting the free float of the company as long as such funds do not occupy a board seat,” he added.

Mr. Ricafort said the amendment would provide better transparency as well as “properly determine market activities and liquidity of the shares.”

“The available public free float would better reflect that reality for those listed companies, as part of greater transparency for investors,” Mr. Ricafort said.