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KUALA LUMPUR (Nov 24): CGS-CIMB Research said that Supermax Corp Bhd will likely be included in the KLCI FBM index for the first time, replacing KLCCP Stapled Group, as the latter is ranked the lowest among the current 30 components. of KLCI by market capitalization as of the end of November 23, 2020.
In a strategy note yesterday, CGS-CIMB said that FTSE Russell must announce the results of its next semi-annual review of the FTSE Bursa Malaysia index series on December 3, 2020.
The research house said it expects the review to use market capitalization data as of the close of business on Nov. 23.
He said all the constituent changes in the review will go into effect on December 21.
“This review is closely followed by the market as it could have an impact on KLCI index linked products such as FTSE 30 ETFs and KLCI index linked funds.
“KLCI’s current components represent approximately 58% of the total market capitalization as of October 30, 2020,” he said.
CGS-CIMB said that the basic rules of the FTSE Bursa Malaysia index stipulate that: 1) a security would be inserted into the FBM KLCI during the periodic review if its market capitalization has risen to position 24 or more, and 2) a security would be removed value in periodic review if it has fallen to position 36 or less.
In addition to market capitalization ratings, the other two criteria that companies must meet for inclusion in the KLCI are (1) free float of 15% or more, as well as (2) liquidity.
The research house said a quick count of 60 companies under its coverage that have reported their results this quarter revealed that 37% of companies published results that were above expectations (compared to the second quarter of 2020 or 2Q20 : 25%).
He said the 3Q20 earnings season has been encouraging, as most companies’ earnings recovered after the economy reopened following the motion control order (MCO) in 2Q20.
“Companies in the rubber glove, EMS and petrochemical sectors have shown better results than expected 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 within the next six business days.
“However, earnings may decline sequentially in Q4 following the introduction of the recovery motion control order (RMCO) due to the record of new Covid-19 cases, which have led to lower consumer spending.
“Pending the end of the earnings season, we maintain our KLCI end-2020F target of 1520 points, based on 16 times the P / E CY21F (price-earnings forecast for calendar year 2021),” he said.
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