Published November 13, 2008

Stocks slump after MSCI review

By LYNETTE KHOO

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(SINGAPORE) Shares of Keppel Land, Venture Corp, CapitaCommercial Trust (CCT) and Yanlord Land slumped on news that they will be dropped from the MSCI (Morgan Stanley Capital International) Singapore Index as of the close of Nov 25.

No new stocks will be added to the index, according to MSCI Barra, which provides the MSCI indices.

The market reacted negatively to the news yesterday. Shares of Keppel Land lost 4.9 per cent to $1.93, while Venture Corp shed 10 per cent to $5.03. CCT slipped 1.6 per cent to 94.5 cents.

As many fund managers track the MSCI Singapore index more than the benchmark Straits Times Index, their removal from the MSCI Singapore index may lift them off the radar screen of these fund managers, brokers said.

Securities in the MSCI country indices are free-float adjusted, and screened by size, liquidity and minimum free float.

MSCI Barra had also announced changes to the MSCI Global Investable Market Indices - including the MSCI Global Standard and MSCI Global Small Cap Indices as well as the MSCI Large Cap, MSCI Mid Cap, and MSCI Investable Market Indices - in its semi-annual index review on Tuesday.

Some 131 securities will be removed from the MSCI Global Standard Indices, while 67 securities will be added as of the close of Nov 25. For the MSCI AC Asia Pacific Index, a total 49 securites will be delected and only 18 added.

Changes will also be made to other MSCI indices. For instance, the MSCI All Country World Index (ACWI) Value Index, will see 435 additions or upward changes in Value Inclusion Factors (VIFs), and 351 deletions or downward changes in VIFs.

Such across-the-board changes were likely triggered by the drastic drop in market turnover and values in equities worldwide as no market was spared.

A dealer with a European brokerage said that these adjustments to index components could also be driven by the need to improve the performance of these indices by shedding off underperforming stocks.

Since MSCI Barra's previous review released on May 6, nervous trading has cost Keppel Land some 68 per cent of its market value, and shaved 55 per cent off Venture Corp's market cap.

CCT lost 59 per cent, while Yanlord's market value dived 70 per cent.