AMMB Holdings Bhd and QL Resources Bhd could well replace Hartalega Holdings Bhd and Top Glove Corp Bhd in the upcoming FBM KLCI constituents review for December.
This is because the market capitalisation rankings of both Big Four glovemakers have fallen below the 36th position based on the latest data as of Nov 1, according to CGS-CIMB Research.
“Based on Refinitiv market data as at the close of trading on Nov 1, Hartalega and Top Glove are ranked 39th and 42nd in market cap respectively,” observed head of research Ivy Ng Lee Fang in a market strategy note.
“We think AMMB and QL Resources which are ranked 28th and 29th in market cap could gain entry into the FBM KLCI index in the upcoming review to replace Hartalega and Top Glove.”
Interestingly, CGS-CIMB Research reckoned that Hap Seng Consolidated Bhd which is ranked a higher 26th in market cap may not qualify as calculations by the research house suggests that it has not passed the liquidity test.
“We estimate that AMMB’s and QL Resources’s potential FBM KLCI weightage will be 1.9% and 1.2% respectively against Top Glove’s current 1.0% and Hartalega’s 0.8%,” projected CGS-CIMB Research.
“AMMB and QL Resources could gain investor interest due to their potential inclusions. We have “add’ calls on both.”
The research house expects some short-term selling pressure on Top Glove and Hartalegaw which (“reduce” calls on both) if they are excluded from the FBM KLCI.
“This would also mean glove players will not be represented in the benchmark index while the bank and consumer sectors will see higher weightage in the FBM KLCI,” noted CGS-CIMB Research.
FTSE Russell is due to announce the results of its upcoming semi-annual review of FTSE Bursa Malaysia Index Series on Dec 1 (Thursday).
CGS-CIMB Research gathers that the review will use the market capitalisation data at the close of trading on Nov 21 (the data on a Monday, four weeks prior to the effective date of the changes). All constituent changes pursuant to the review will take effect on Dec 19 (Monday).
“This review is followed closely by the market as it could have an impact on FBM KLCI index-linked products like ETFs (exchange traded funds) and FBM KLCI index-linked funds,” reckoned the research house. “The current basket of FBM KLCI stocks account for about 60% of the total market capitalisation as of Nov 1’s closing.” – Nov 4, 2022
