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New-look STI to be launched on Thursday - Jan 07, 2008 (ST)

BackJan 07, 2008

The Straits Times / The Business Times News On SPH

New-look STI to be launched on Thursday

30-strong indicator set for smooth transition and will still be benchmark.

By Lee Su Shyan, Assistant Money Editor
Jan 07, 2008
The Straits Times

ON THURSDAY, the slimmed-down Straits Times Index (STI) - the benchmark used by investors worldwide to follow the mood of the Singapore market - will make its debut.

MAKEOVER: The new STI will see 21 companies departing and four companies, which include SIA Engineering and Yanlord Land Group, joining.

SIA Engineering: Aircraft maintenance firm with a market value of about $4.8 billion as at Dec 31.

Wilmar International: Palm oil giant run by chief executive Kuok Khoon Hong - the nephew of 'sugar king' Robert Kuok. As at Dec 31, the company was worth $34.4 billion. Its market capitalisation is currently second only to that of SingTel's.

Yangzijiang Shipbuilding Holdings: This was the largest initial public offering on the Singapore Exchange last year. The Chinese shipbuilder now has a market value of about $6.6 billion, after its shares more than doubled in value after the listing in April.

Yanlord Land Group: The high-end Chinese property developer focuses on the Shanghai district. It has a market value of about $6 billion .

The revamped version will comprise 30 blue-chip stocks instead of the current 47.

That same day, another 18 new indexes called the FTSE ST indexes will also go live.

Singapore Press Holdings, the Singapore Exchange and Britain's FTSE Group are spearheading this revamp.

They say the revamp will help the STI 'better reflect the performance of various sectors of the Singapore stock market and meet the needs of both retail and institutional investors globally'.

The new STI will see 21 companies departing and four companies joining.

Those joining are aircraft maintenance firm SIA Engineering, Wilmar International, Yangzijiang Shipbuilding Holdings and Yanlord Land Group.

Palm oil giant Wilmar International, which went public after a reverse takeover in 2006, has seen its fortunes soar since it went public a little over a year ago.

The Chinese company Yangzijiang Shipbuilding was Singapore's largest IPO last year.

Yanlord Land is a high-end property developer that focuses on the Shanghai area.

Of the 21 stocks leaving the STI, 16 will head to the 50-member FTSE ST Mid Cap Index. The 16 include ComfortDelGro, Venture Corp, SingPost and Parkway Holdings

While the STI is expected to remain the most widely- tracked benchmark, the FTSE ST Mid Cap Index is also expected to be popular. It will track the 50 next largest mainboard-listed companies by full market capitalisation.

Another closely-watched index is likely to be the FTSE ST China Index, comprising 50 China plays.

The FTSE ST Small Cap Index covers 193 companies. Three companies from the old STI - Creative Technology, Datacraft Asia and Jurong Technologies Industrial Corp - will join their ranks.

Of the 21 firms leaving the STI, two companies - Jardine Matheson and Total Access Communication - will not feature in either the FTSE ST Mid Cap or the FTSE ST Small Cap indexes.

The mmanaging director of boutique corporate finance house NRA Capital, Mr Kevin Scully, noted about the revamped STI: 'The index is more robust and caters well to the institutional investor.'

More investment products are likely to be issued on the STI if the demand exists and liquidity improves, as is expected to be the case, said Mr Ooi Lid Seng, Societe Generale's vice-president of structured products for Asia, excluding Japan.

'We will be exploring the issuing of new products,' he said.

A test version of the new STI has been running on the FTSE Group's website since Oct 8. It began with a trial value of 1,000 points but, once the new STI takes effect on Thursday, the opening value will be the closing value of the current STI on Wednesday.

For historical analysis, there will also be a re-created history of the STI going back to Aug 31, 1999. This will be available on Friday.

For the 18 new indexes, their trial values have also been calculated since Oct 8, starting at 1,000. Their opening values on Thursday will be the same as their closing trial values on the previous day.

Industry players expect a fuss-free transition.

'This has been planned for since last year and the index calculations have already been running for a couple of months, so it would really be surprising not to see a smooth changeover,' said Mr T.K. Yap, the executive director of OCBC Securities.

Pointing to the level of interest in STI warrants, which account for about 15 per cent of total warrant turnover on the Singapore market, he said this showed that investors are interested in trading the STI.

He added: 'The market needs more ways to trade the STI.'

Mr Yap hopes that active listed derivatives such as options and futures will be introduced in the future.