2 REVIEWS TO IMPACT STOCK TRADING
Analysts expect high volume and value during the MSCI rebalancing exercise
TWO events on May 29 and June 6 will have a significant impact on investors’ trading behaviour on Bursa Malaysia.
First is the MSCI Equity Indexes semi-annual review, followed by the FTSE Bursa Malaysia Index Series semi-annual review.
MSCI provides global equity, fixed income, hedge fund and stock market indexes, while the FTSE Bursa Malaysia Index Series is a broad range of indexes covering companies listed on the Main Market and ACE Market.
Analysts said the MSCI rebalancing is more significant as it has traditionally resulted in an increase in trading activities.
However, they said the outcome of first semi-annual review of FTSE Bursa Malaysia KLCI (FBM KLCI) is also set to change the trading dynamics of the affected stocks, with Westports Holdings Bhd and YTL Corp Bhd
having the chance to be included in the key index.
MIDF Research head Redza Rahman told the New Straits
Times the MSCI rebalancing exercise usually has a bigger impact on investors’ trading behaviour based on past trading values and volumes.
The need for fund managers, especially the exchange-traded funds which benchmark MSCI indices, to replicate the index constituents while minimising the tracking errors would result in significant trading activities on the rebalancing day.
“Henceforth, we expect the volume and value to be high for the week of the rebalancing as evidenced by previous rebalancing exercises in May and November last year,” he said.
Redza expects a number of China-listed shares to get into the MSCI Index.
Stock market analyst Nazarry Rosli said the MSCI rebalancing will have more impact on Bursa Malaysia as it is followed by foreign investors.
Economist and former investment banking analyst Izzuddin Yussof said any MSCI rebalancing will affect foreign investors’ decision on the local capital market.
On the other hand, the FBM KLCI review will have an impact on the affected stocks more than the overall index itself, he said.
The key benchmark index will see a change of constituents after the market closes on June 21.
MIDF Research said Westports and YTL have strong potential to be included in the rebalancing exercise. This was based on adjusted market cap value and adjusted market cap ranking from December last year to the end of last month.
It said Malaysia Airports Holdings Bhd has the highest possibility of being removed from the list if the liquidity factor were to be considered on top of the adjusted market cap rank.
Hong Leong Financial Group Bhd and Hong Leong Bank Bhd are two other constituents which may be taken out from the index.
This is because their volume, based on median trading volume per month, has remained below 0.04 per cent for more than 20 months since July 2017.
However, they may be saved by their adjusted market cap ranking which stood at 19th and seventh spot between December and last month, said MIDF Research.
As for its FBM KLCI year-end target, the firm has kept it at 1,800 points, pending corporate results for the first quarter.