Published June 12, 2009

IJM may enter new M'sian index: Credit Suisse

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(KUALA LUMPUR) IJM Corp and Gamuda Bhd, two of Malaysia's biggest builders, and SP Setia Bhd, a developer, may be included in a new country benchmark stock index next month after their market values rose, Credit Suisse Group said.

Bursa Malaysia Bhd will cut the number of companies in its share index to 30 from 100 on July6.

Stocks that may be excluded are Malaysian Airline System Bhd, RHB Capital Bhd and Petronas Dagangan Bhd because of their low free-float percentage, according to the report. Gamuda climbed to a 10-month high while SP Setia gained to the highest in 15 months.

'With US$83 billion worth of domestic funds benchmarked to the stock index, changes in the weightings and components could impact stock prices,' Stephen Hagger, an analyst at Credit Suisse, said in a report yesterday.

Bursa Malaysia Bhd, the country's stock exchange manager, will cut the number of companies in its share index to 30 from 100 on July 6, removing the smallest and most tightly held companies in a bid to lure investors.

The Kuala Lumpur Composite Index will become the FTSE Bursa Malaysia KLCI.

Gamuda jumped 4.1 per cent to close at RM2.78, the highest level since Aug 18. Shares have climbed 47 per cent this year.

SP Setia, Malaysia's largest property developer, surged 5.1 per cent to RM4.52. The stock has advanced 46 per cent this year, while IJM more than doubled.

The Kuala Lumpur Composite has gained 24 per cent. Malaysian Airline and Petronas Dagangan each dropped 0.6 per cent.

The companies may enter the new index because of their higher free floats, Mr Hagger said.

The new index will comprise the 30 biggest companies listed on the stock exchange's main board and use the free-float method, which is based on the number of shares publicly available for trading, to decide on their weightings, in line with the FTSE global index standard, Bursa said on Jan 21.

The new gauge will mirror the FTSE Bursa Malaysia 30 Index, which comprises the 30 largest stocks and free-float adjusted, Mr Hagger said.

IJM, Gamuda and SP Setia are among the top 35 stocks by market value in Malaysia and among the top 25 in the MSCI weightings, he said. As such, they could possibly be included in the new index, Mr Hagger said.

Any change in the weighting and components of the stock index will have a 'significant impact on affected stocks' because 35 per cent of the bourse's market value is benchmarked against the Composite Index, Mr Hagger said.

This represents about US$83 billion, of which US$43 billion are institutional money and US$40 billion held in government equity-linked funds, he said.

Bumiputra-Commerce Holdings Bhd, Public Bank Bhd, Resorts World Bhd, YTL Power International Bhd and Parkson Holdings Bhd are also expected to be 'clear beneficiaries' of the new gauge, Mr Hagger said.

Companies must have a minimum 15 per cent free float to be included, Bursa has said. Shares held by the government or major shareholders that are not traded in the market will lower the weighting of the company on the index. -- Bloomberg