KUALA LUMPUR (Nov 24): CGS-CIMB Research said Supermax Corp Bhd will likely be included in the FBM KLCI index for the first time, replacing KLCCP Stapled Group as the latter is ranked the lowest among the current 30 KLCI constituents by market capitalisation as at the end of Nov 23, 2020.

In a strategy note yesterday, CGS-CIMB said FTSE Russell is due to announce the results of its upcoming semi-annual review of the FTSE Bursa Malaysia Index Series on Dec 3, 2020.

The research house said it expects the review to use the market capitalisation data at the close of trading on Nov 23.

It said all constituent changes in the review will take effect on Dec 21.

“This review is followed closely by the market as it could have an impact on KLCI index-linked products like FTSE 30 ETF and KLCI index-linked funds.

“Current KLCI constituents account for about 58% of the total market capitalisation as at Oct 30, 2020,” it said.

CGS-CIMB said the FTSE Bursa Malaysia index ground rules stipulate that: 1) a security would be inserted in the FBM KLCI during the periodic review if its market cap has risen to the 24th position or above, and 2) a security would be deleted at the periodic review if it has fallen to the 36th position or below.

It said apart from market capitalisation rankings, the other two criteria that companies need to meet for inclusion in the KLCI are (1) free float of 15% and above, as well as (2) liquidity.

The research house said a quick tally of 60 corporates under its coverage that have reported their results this quarter revealed that 37% of the corporates posted results that were above expectations (versus the second quarter of 2020 or 2Q20: 25%).

It said the 3Q20 results season has been encouraging as most companies’ earnings rebounded following the reopening of the economy post the movement control order (MCO) in 2Q20.

“Companies in rubber gloves, EMS and petrochemical sectors have shown better-than-expected results so far.

“However, it may be too early to conclude as 54% or 70 companies under our coverage have not yet reported and will do so over the next six trading days.

“However, earnings may decline sequentially in 4Q following the introduction of the recovery movement control order (RMCO) due to record new Covid-19 cases, which have led to lower consumer spending.

“Pending the completion of the results season, we retain our end-2020F KLCI target of 1,520 points, based on 16 times CY21F P/E (forecasted calendar year 2021 price-earnings),” it said.