Sector expected to see higher weighting on FBM KLCI

This article first appeared in The Edge Malaysia Weekly, on November 12, 2018 - November 18, 2018.
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GLOVE players may see higher weighting on the equity benchmark index in the upcoming November review as Top Glove Corp Bhd could replace Telekom Malaysia Bhd as a component stock.

Based on its market capitalisation as at Nov 8, TM has plunged to 39th position following a sharp decline in its share price this year, while Top Glove has climbed to 28th.

Hong Leong Investment Bank head of retail research Loui Low thinks it is likely that Top Glove will secure a place on the benchmark index, replacing TM which has fallen out of the top 35 companies in terms of market capitalisation.

Based on the FBM Index Series Ground Rules that were updated last month, the FBM KLCI constituents are due for a review using their share price based on the market close on Nov 26. The constituent changes will be implemented after market close on Dec 21 and take effect on Dec 24.

Maybank Investment Bank Research analyst Wong Chew Hann says if Top Glove were to be added to the benchmark index, the combined weight of the glove sector could rise to 3.6% from 1.8% at present.

A fund manager tells The Edge that this could lead to a surge in interest in glove counters.

“With more interest from index investing funds, Top Glove could see some upside in its share price. This could translate into higher price-earnings for the counter, which would make its peers look more attractive in terms of valuations. This would then lead to some buying interest in the other glove counters as well,” he opines.



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