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Methodology for new-look STI and its sister indices - Jan 10, 2008 (BT)

BackJan 10, 2008

The Straits Times / The Business Times News On SPH

Methodology for new-look STI and its sister indices

We introduce the 19 indices in the FTSE ST Index Series.


Jan 10, 2008
The Business Times

TODAY marks the launch of the revamped Straits Times Index, developed jointly by Singapore Press Holdings, the Singapore Exchange and Britain's FTSE Group.

The new index features just 30 stocks, down from 47. Four new stocks - Yangzijiang Shipbuilding, Yanlord Land, Wilmar International and SIA Engineering - have been admitted, while several others will no longer form part of the index.

At the same time, another 18 new indices also go live today, helping to provide fuller information for investors trading different sectors of the market.

In all, the FTSE ST Index Series includes:

  • The STI - comprises the largest 30 companies by full market capitalisation;
  • FTSE ST Mid Cap Index - comprises the next 50 companies by full market cap;
  • FTSE ST Small Cap Index - comprises the next largest companies, after those included in the STI and the mid-cap index, which are within the top 98 per cent of the SGX Main Board by full market cap;
  • FTSE All-Share Index - comprises the constituents of the above three indices. i.e. the STI, the mid-cap and the small-cap indices;
  • FTSE ST Fledgling Index - comprises the SGX Main Board-listed stocks that are too small for the All-Share index;
  • FTSE ST China Index - represents performance of Singapore companies with a major percentage owned by Chinese investors, and comprises companies in the All-Share index that are at least 30 per cent owned by either the Chinese government, Chinese companies or Chinese residents or nationals;
  • Ten industry indices - the Oil and Gas, Basic Materials, Industrials, Consumer Goods, Healthcare, Consumer Services, Telecommunications, Utilities, Financials, and Technology sector indices; and
  • Three sector/sub-sector indices - the Real Estate, Real Estate Holding & Development, and Reit (real estate investment trust) indices.

Eligibility

All classes of ordinary shares in issue are eligible, subject to other conditions like free float and liquidity.

Exchange Traded Funds or other funds that derive their prices from underlying holdings are non-equity instruments and not eligible. Convertible preference shares and loan stocks are also ineligible, until converted.

To be eligible for inclusion, securities must have more than 15 per cent free float, and must turn over at least 0.05 per cent of their shares in issue, based on the median daily trade per month, in 10 of the 12 months before a review.

For existing index constituents, securities must turn over at least 0.04 per cent of shares in issue.

The liquidity test is based on a calculation of the median daily trading per month, by ranking each daily trade total and selecting the middle ranking day. Days with zero trading are included, so a security that fails to trade for more than half the days in a month will have a zero median trade.

Calculation

The indices will be Singapore dollar denominated. They will be calculated in real-time using the actual last trade prices, and published every 15 seconds for the STI and every 60 seconds for all other indices in the series.

Each index is calculated as the weighted average of the market capitalisation of its constituents, converted to the index base currency where applicable.

The constituents are also initially weighted by free float, and receive a weightage that is proportional to the percentage of the float.

For example, a company with a free float of between 40 and 50 per cent will be weighted 50 per cent, while companies with more than three-quarters of their shares freely floated will be weighted 100 per cent.

Review

The indices will undergo reviews on a semi-annual basis in March and September, based on data from the last working days of February and August respectively.

The reviews will be implemented on the next working day following the third Fridays of March and September.

Only the STI and the FTSE ST Mid Cap Index will see a fixed number of component stocks.

At the review, a company will be admitted to the STI if it rises to the 20th or higher rank by full market cap, and to the Mid Cap Index if it rises to the 60th or higher rank.

Conversely, a company will be deleted from the STI if it falls to the 41st rank or below, and from the Mid Cap Index if it falls to the 101st rank or below.

In the case of a new issue so large - full market cap amounting to 2 per cent or more of the FTSE ST All Share Index - that the effectiveness of the index as a market indicator is adversely affected by its omission, FTSE can decide to include it in the STI after the first day of trading.

FTSE will publish a Reserve List of the five highest ranking non-constituents of the STI and the 10 highest ranking non-constituents of the Mid Cap Index at the review. The list will be used if companies are removed from the indices - such as in the case of a merger or takeover - before the next review.

Securities suspended from trading for more than 10 days may be deleted.

For the other indices, a deleted constituent will not be replaced, nor will constituents be removed to make way for new companies.

» For details, please click here.