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PETALING JAYA: Bursa Malaysia’s FBM KLCI benchmark, which is already heavily skewed towards rubber glove counters price movement, will see more rubber glove weight added to it from December 21st.
Supermax Corp Bhd
will join its two largest counterparts in the top 30 list, marking a historic moment for the index with three glove manufacturers, but also one that will make it more sector sensitive.
Together with Top Glove Corp Bhd and Hartalega Holdings Bhd, Kenanga Research said the three components were estimated to account for 14.3% weight based on current prices, down from 11.7%.
This has also raised some points of debate among analysts about the index’s increasing exposure to risks facing the sector.
This has also raised some discussion points among analysts about the index’s increasing exposure to the risks facing the sector. A good example of this was the Top Glove crash yesterday, which fell 7.48% or 55 sen to RM6.80 yesterday after 28 of its factories in Klang had to be closed in stages due to an increase in cases of Covid-19 among its workers. The group alone was responsible for a third of the FBM KLCI decline yesterday.
A good example of this was Top Glove’s crash yesterday, dropping 7.48% or 55 sen to RM6.80 yesterday after 28 of its factories in Klang had to be shut down in stages due to a spike in Covid cases. -19 among its workers.
The group alone was responsible for a third of the FBM KLCI decline yesterday.
The index fell 19.09 points or 1.2% to 1,578.39 points, of which Top Glove contributed to a 6.88 point drop after cutting RM4.43bil from its market cap in just one day.
So far, a total of 5,767 workers have been tested and 2,534 have been found to be positive for Covid-19.
Its other counterpart in the index, Hartalega, lost 28 sen to RM14.18, which translated into a 1.46 point drop in the index, as yesterday market sentiments turned bearish with 1.093 declines across the board.
Its other counterpart in the index, Hartalega, lost 28 sen to RM14.18, which translated into a 1.46 point drop in the index, as yesterday market sentiments turned bearish with 1.093 declines across the board.
“You can already see how negative news from a rubber glove counter can affect the index. If it were an industry-wide problem, we would be seeing bigger movements in the index compared to what it was previously, ”said one analyst.
An important advance that the analyst anticipated would be the announcement of a successful development of a vaccine that is safe for global consumption, something free of ethical hazards and 100% tested by the relevant agencies.
While something like this would definitely trample rubber glove counter prices like what happened after Pfizer announced its 95% effective mRNA-based vaccine, this may be offset by the rally in other sectors as the The market expected borders to reopen and businesses to recover. . The FBM KLCI is now ready for its semi-annual review and FTSE Russel is expected to make an announcement next Thursday about the listing of Supermax.
This will be based on market capitalization data at the close of the trading day on Monday, which placed Supermax 24th on the list with a market cap of RM20.96bil, according to Bloomberg data.
According to the basic rules for the construction and management of the FTSE Bursa Malaysia index series, a value will be inserted in the periodic review if it exceeds position 25. With the inclusion of Supermax in the FBM KLCI, this would mean that the reincorporation of KLCCP Stapled Securities on the index in June was short-lived as it would be phased out next month because it has the lowest market capitalization of RM13.92bil, placing it at 35th.
Kenanga said this was contrary to previous expectations that Genting Bhd and its subsidiary Genting Malaysia Bhd (GenM) would disappear from the list after the two groups rebounded strongly after positive vaccine news.
As of Monday, the market capitalization of Genting and GenM was RM15.83bil and RM14.25bil respectively.
“Based on the index stocks represented by Supermax from 1.62 billion to RM8.16 (on Monday) versus KLCC’s 442.85 million at RM7.71, we estimate that Supermax would enter around 2.6% of the weight versus KLCCP that would come out with 0.68% weight.
“Final figures, however, will be based on closing prices on Friday, December 18, after which the new components will be reflected for the first time when trading begins on Monday, December 21,” Kenanga said in its report from market strategy.
It added that Supermax’s estimated net income for CY21 of RM2.5bil with earnings per share (EPS) of 92.3 sen exceeded KLCCP’s estimate of RM669 thousand with EPS of 37.1 sen.
As the glove maker input will be represented with a higher number of shares compared to KLCCP, the research house said that it was highly likely that FBM KLCI’s estimated EPS for FY 21 will be improved by about 2.4% .
“We maintain our EPS estimate for fiscal year 21 at 95.5 sen for now, pending the conclusion of the 3TCY20 earnings season early next week,” he said.
CGS-CIMB Research said the upcoming review will be closely watched by the market as it could have an impact on index-linked products such as FTSE 30 ETFs and KLCI index-linked funds.
The current components of FBM KLCI represent approximately 58% of the total market capitalization as of October 30.
Among the components, MISC Bhd, Axiata Group Bhd and Tenaga Nasional Bhd posted the biggest declines in market capitalization since FBM KLCI’s last review date on May 22. “The three main winners were Top Glove, Hartalega and Press Metal Aluminum Holdings Bhd.
“The sharp rise in Top Glove and Hartalega was expected given that these two rubber-gloved players are the main beneficiaries of the Covid-19 outbreak,” he said.
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