FBM KLCI Semi-Annual Review: Key Changes and Potential New Entrants

The FTSE Bursa Malaysia (FBM) KLCI is set to undergo its semi-annual review on December 23, 2024, with data cut-off on November 25. This review is significant as it reshuffles the composition of blue-chip stocks, potentially impacting market dynamics and investor sentiment. The review considers changes since the previous cut-off date on May 27 and includes the recent listing of 99 Speed Mart Retail Holdings.

FBM KLCI Semi-Annual Review

Potential New Entrant: Gamuda

Gamuda is expected to make a strong return to the FBM KLCI after a two-year absence, during which it remained on the reserve list for five consecutive semi-annual reviews. As of September 13, Gamuda’s share price has surged by 19% to RM7.59, placing it at the 24th spot in market capitalization. If it maintains its rank of 25th or above by the cut-off date, Gamuda is set to rejoin the index, meeting both the free float and liquidity requirements. Its last entry into the FBM KLCI was in 2010, before being removed in the December 2011 review.

Potential Exit: Genting Malaysia

Genting Malaysia faces possible exclusion from the index, having dropped to the 36th spot in market capitalization as of the latest review. If it remains at this position by the November 25 cut-off, it will likely be removed, making room for Gamuda’s inclusion. This change reflects shifting market conditions and the evolving landscape of Malaysia’s top companies.

No Fast Entry for 99 Speed Mart

While new companies can qualify for fast entry if their full market capitalization amounts to 2% or more of the FBM EMAS Index, 99 Speed Mart does not meet this criterion. At its IPO price of RM1.65, the company’s market cap stood at just 0.8% of the FBM EMAS, disqualifying it for fast entry. The last company to gain fast entry into the FBM KLCI was IHH Healthcare in August 2012.

Sector Weightage Adjustments

This review also marks a potential shift in sector weightage within the index. If Gamuda joins, the construction sector’s weightage would rise to 3.18%. Financial Services will continue to dominate, holding 41.9% of the index. Meanwhile, the consumer sector’s weightage is expected to decrease from 9.81% to 8.48%, reflecting market capital changes among consumer-related companies.

Implications for Investors

The review’s outcome will influence investor strategies, particularly those focused on blue-chip stocks and sector performance. Gamuda’s inclusion could increase investor interest in the construction sector, while Genting Malaysia’s potential exit might lead to a reassessment of consumer sector stocks.

In summary, the FBM KLCI’s semi-annual review is poised to introduce notable changes, reflecting market shifts and offering a glimpse into Malaysia’s economic direction. Investors will be closely watching these movements, especially the return of Gamuda and the potential removal of Genting Malaysia.

Reserve List

The upcoming FBM KLCI review is likely to bring changes to the reserve list. 99 Speed Mart, which currently trades at RM1.88 and has a market cap of RM15.79 billion, is expected to join the reserve list. For 99 Speed Mart to enter the FBM KLCI by December 2024, its share price would need to reach RM2.41. This mirrors the entry of Mr DIY Group in June 2021, after its share price more than doubled post-listing.

The expected reserve list changes include the addition of Gamuda and the removal of Genting Malaysia, along with Dialog Group making way for 99 Speed Mart. The top 40 shares all meet the free float requirement of over 15%, and liquidity estimates indicate that only KLCCP Stapled Group fails to meet the minimum trading volume criteria.

With Gamuda’s expected inclusion, the Construction sector will return to the index with a weightage of 3.18%. Meanwhile, the potential removal of Genting Malaysia will reduce the Consumer Products & Services sector’s weightage from 9.81% to 8.48%. Financial Services will remain the dominant sector in the index at 41.90%. – Source MIDF

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