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SPC, Creative could be among big names dropped in new STI - Jun 07, 2007 (ST)

BackJun 07, 2007

The Straits Times / The Business Times News On SPH

SPC, Creative could be among big names dropped in new STI

Thinly-traded Jardine firms also feature in talk over counters that will face the chop.

By Lee Su Shyan, Companies Correspondent
Jun 07, 2007
The Straits Times

BIG-NAME stocks such as Singapore Petroleum Company (SPC), Creative Technology and companies from the Hong Kong-based Jardine group could be among those to be dropped from the revamped Straits Times Index (STI).

The market is now abuzz with speculation over which stocks will go and which will be included after Tuesday's announcement that the STI will be cut to 30 stocks from the current 49, from September.

Inclusion in the STI carries bragging rights - and gives a company greater exposure to investors, both small-time punters and big institutions.

The STI's first overhaul in nine years is aimed at focusing on the largest and most heavily traded blue chips - to ensure that the index remains the key Singapore market barometer for local and foreign investors.

The three parties cooperating on the revamp are Singapore Press Holdings, the Singapore Exchange (SGX) and the London-based FTSE Group.

They say the bottom 19 stocks represent only about 10 per cent of the market value of the companies on the STI. That means cutting the number of companies represented on the STI will not have a dramatic impact on it.

The current STI already includes 24 of the top 30 listed stocks in Singapore, in terms of their total market value.

Of the six companies not included, thinly-traded Great Eastern Holding is unlikely to be a candidate for the new STI. Of the other five, two are recently-listed market stars, oil palm player Wilmar International and China-based Yangzijiang Shipbuilding, which may be prime candidates to join the index, market players said.

The FTSE website says the liquidity - that is, how heavily a stock is traded - of new listings will be studied to see if they can be included.

Talk over the composition of the new STI also centres on three firms from the Jardine group - Jardine Strategic, Jardine Matheson and Hongkong Land - which are included in the current index.

Speculation is growing that Jardine Strategic and Jardine Matheson could be dumped as only a couple of hundred thousand shares change hands daily. In contrast, the local banks can easily muster a daily volume of a few million shares.

But OCBC Investment Research head Carmen Lee said of the Jardine firms: 'If you want to have a fair representation of the Singapore market, you should include them as these are significant stocks.

'But maybe local investors are not so familiar with the stocks as few local houses cover them.'

Size is important in the new STI, but liquidity and free float are factors that will be taken into account too.

Free float refers to the number of shares that can be traded freely among the public and not shares that are tied up in the hands of substantial shareholders.

FTSE says the design and rules governing the main index - and 18 other sector-specific indexes that will be also launched in September - have not been confirmed.

But the design is likely to follow that of existing FTSE indexes, including its famous FTSE 100 Index of London stocks. Referring to its FTSE Global Equity Index series, for example, FTSE says each stock 'will be tested for liquidity by calculation of its median daily trading per month'.

The stock's daily volume will be monitored over a 12-month period and must reach a certain percentage of its total shares, for at least 10 out of the 12 months.

On the current STI, the 10 smallest companies in terms of market value, based on share prices as at May 30, include such well-known names as Jurong Technologies, Creative, Datacraft, water treatment specialist Hyflux and chip player United Test and Assembly Center.

Labroy Marine, M1, People's Food Holdings, Singapore Post and Wing Tai also fall into this group. Wing Tai's market value is about $2.5 billion while the smallest STI member, Jurong Technologies, has a market value of $415 million.

» WHAT THE NEW STI COULD LOOK LIKE