This article first appeared in The Edge Financial Daily on May 18, 2018

KUALA LUMPUR: Astro Malaysia Holdings Bhd and AMMB Holdings Bhd are at risk of being removed from the 30 constituent stocks of the FBM KLCI ahead of an upcoming review in June, according to Affin Hwang Investment Bank Bhd (Affin Hwang IB).

“Astro and AMMB could potentially face some near-term selling pressure ahead of the review of the FBM KLCI constituents in June as investors reposition their weightings of these stocks,” Affin Hwang IB analyst Kevin Low said in a strategy note yesterday.

In its latest analysis, Affin Hwang IB said it had flagged Astro and AMMB as they are on the verge of breaching one of the three requirements to remain in the FBM KLCI, a heavy-weight index and barometer of the market’s performance.

A stock is added to the FBM KLCI’s top-30 list when its market capitalisation rises to the 25th position or above, and removed if its market capitalisation falls to the 36th position or below.

Based on the closing prices on Wednesday, Affin Hwang IB said its analysis revealed both Astro and AMMB to have fallen beyond the 36th position, as they are ranked 39th and 43rd respectively.

“However, we note that Astro’s and AMMB’s stock prices have underperformed the FBM KLCI by 35.8% and 20.6% respectively over the past three months, likely pricing in some of the risk,” Affin Hwang IB added.

Affin Hwang IB said YTL Corp Bhd, sitting on the borderline 36th position, is also at risk of exclusion from the FBM KLCI’s top-30 list when the next review is done later this month or June.

On the flip side, Affin Hwang IB noted that its analysis revealed that three new stocks — Hartalega Holdings Bhd, Dialog Group Bhd and Malaysia Airports Holdings Bhd (MAHB) — could be possible inclusions.

Going forward, it targets for the FBM KLCI to hit 1,923 points by year end, owing to likely better governance of the newly formed Pakatan Harapan government and potentially improved consumer demand.

The FBM KLCI closed 0.21% or 3.82 points lower yesterday at the 1,854.44 level.

A capitalisation-weighted stock market index, the FBM KLCI was first introduced in April 1986.

The FBM KLCI, along with other index series on the local bourse, is reviewed on a semi-annual basis by FTSE Russell, a global provider of benchmark indices.