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PSE: Index revamp result of 2007 free-float review

04/29/2008

The Philippine Stock Exchange (PSE) said yesterday its decision to once again change in the composition of stocks that make up the PSE index (PSEi) was the result of its latest free float-based review of trading activity for last year.

As an offshoot of the new PSE review, the composition of the PSEi will change as four firms gain entry, and an equal number lose their slots, PSE president Francis Lim said. In all, the six-sector indices will add 18 companies and lose three others, he added.

Those added to the PSEi are Philippine National Bank, Rizal Commercial Banking Corp., Union Bank of the Philippines and Vista Land and Lifescapes Inc., while those to be removed are ABS-CBN Broadcasting Corp., Belle Corp., DMCI Holdings Inc. and Petron Corp.

Six companies will make it to the Services Index; three to the Holding Firms Index; two each to the Industrial Index, the Property Index, and to the Mining & Oil Index; and one will be added to the Financial Index. At the same time, one company each will be removed from the Financials Index, Services Index and Holding Firms Index.

The PSE does not set a limit on the number of companies that make up the sector indices, but it limits to 30 the number of firms in the PSEi, which is the main index of local stock price movements.

Lim said the changes in the composition of the indices will take effect on May 26. The price movement of these firms, thus, will determine the direction of the PSEi from that date onwards for six months or until the PSE completes another index review. The latest review covered trading activity from Jan. 1 to Dec. 31, 2007.

“As we complete another review of the indices, we in the PSE reiterate our position that the free float methodology in computing the index benefits both investors and the listed companies alike,” Lim stressed.

“That’s because the exercise encourages companies to increase their free float,” he explained. “In the process, they increase the level of activity in our market, and this increased activity in turn helps enhance the value of the stocks.”

The Services Index, whose number will go up from 16 to 21, will remove one firm (Ionics, Inc.,) and add the following: Diversified Financial Network Inc., IPVG Corp., Island Information and Technology Inc., Music Corp., Pacific Gaming On-line Systems Inc. and Transpacific Broadcast Group International Inc.