This article first appeared in Capital, The Edge Malaysia Weekly on May 14, 2018 - May 20, 2018

WHILE investors are caught up looking at the impact on the FBM KLCI of Pakatan Harapan’s win in the 14th general election, it is worth noting that there are potential changes to the constituents of the benchmark index in the upcoming review this month.

Looking at market capitalisation, there are 12 companies that have overtaken some of the current component stocks of the FBM KLCI. Those on the list are Hartalega Holdings Bhd, Dialog Group Bhd, Malaysia Airports Holdings Bhd, Lotte Chemical Titan Holding Bhd, Fraser & Neave Holdings Bhd, Gamuda Bhd, Top Glove Corp Bhd, AirAsia Group Bhd, S P Setia Bhd, Westports Holdings Bhd, IJM Corp Bhd and Sime Darby Property Bhd.

Although market capitalisation is not the only criterion for inclusion in the FBM KLCI, one cannot rule out that a shrinking market capitalisation could be a prelude to being excluded from the list. Other factors that are considered include profitability, trading volume and the liquidity of the companies.

Recall that two changes were made to the FBM KLCI member list in November last year. IJM Corp and British American Tobacco (M) Bhd (BAT) were replaced with Press Metal Aluminium Holdings Bhd and Nestlé (M) Bhd.

Nestlé’s share price has risen to an all-time high in the past three months since it became a constitutent of the benchmark index. The blue chip climbed from RM97.30 — a level then viewed as the peak — to its all-time high of RM163 before profit-taking set in recently. It closed at RM137 last Tuesday, the day before polling day. Press Metal, however, has seen a 10.5% decline year to date to RM4.81.

BAT saw a decline of 47.7% to RM22.70 compared with a year ago, while IJM Corp fell 23.8% to RM2.65 during the same period.

Astro Malaysia Holdings Bhd, AMMB Holdings Bhd and KLCCP Stapled Group are among the laggards whose market capitalisations have been overtaken by others. Astro’s share price has slid 29.1% over the last one year to close at RM1.83 last Tuesday and it has been one of the worst performers among the FBM KLCI constituents so far this year. Its market capitalisation has shrunk 35.8% to RM9.5 billion, compared with RM14.8 billion on Nov 30 when the FBM KLCI was last reviewed. At the time, Astro was the 28th largest company by market cap on Bursa Malaysia, but it is now No 42.

Similarly, AMMB was the 33th largest listed company by market cap in November last year, but it has fallen to 38th place. KLCCP was in 29th position based on market cap in November last year, but dropped to the 31st spot at last Tuesday’s closing.

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