New family of stock indices by year-end - Jun 06, 2007 (BT)

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The Straits Times / The Business Times News On SPH

New family of stock indices by year-end

Benchmark STI to comprise 30 stocks, instead of 50 now.

By Conrad Tan
Jun 06, 2007
The Business Times

(SINGAPORE) A new family of 18 indices for the Singapore stock market will be launched later this year to complement the benchmark Straits Times Index (STI), which is also to be redesigned.

The Singapore Exchange (SGX), Singapore Press Holdings and the London-based FTSE Group yesterday signed an agreement to cooperate on creating and marketing the new indices.

At a joint media briefing, they said that the new indices would make it easier for investors here and overseas to track different sectors of interest through greater segmentation of the stock market. They also hope the indices would spur the development of more index-linked products such as exchange-traded funds and index derivatives.

Project partners: (From left) SGX chief executive Hsieh Fu Hua, SPH chief executive Alan Chan and FTSE Group deputy chief executive Donald Keith at the sealing of the deal yesterday to create and market new indices.

The 18 indices for SGX mainboard-listed stocks include 13 sectoral indices that will reflect the performance of stocks in various sectors such as oil and gas, financials, technology, and real estate.

There is also an index to track 'China plays' such as mainboard-listed Chinese stocks, which have become increasingly popular among investors here looking to gain exposure to China's booming economy.

The FTSE ST China Index is the first of several such 'theme indices' that may be launched later, including a possible index for Sesdaq-listed firms when the current review of the SGX second board is completed, reporters were told at the briefing.

The remaining four indices are benchmark indices that - together with the STI - would track all stocks listed on the SGX main board, segmented by their market capitalisation. The new indices are expected to be ready by October.

The STI, the main barometer of the Singapore stock market, will also be revamped to sharpen its focus on the largest and most liquid bluechip stocks.

The number of stocks in the index will be cut to 30 from 50, but there will be no change to its name or published value. The last 20 stocks of the current STI represent just 10 per cent of the index, so the cut is not expected to change the representation of the index significantly, the three parties said in a joint statement.

All the indices will be calculated by specialist index provider FTSE, based on international standards. Companies will be ranked first by their full market capitalisation, then screened and weighted based on the size of their free float - the proportion of shares available for trading by investors. The shares must also pass a liquidity test, to ensure that each index component stock can readily be bought and sold.

The FTSE ST All Share Index will represent the top 98 per cent of mainboard stocks, while the bottom 2 per cent comprising relatively illiquid stocks will be captured by the FTSE ST Fledgling Index. A separate mid-cap and small-cap index will track the rest of the stocks in the All Share Index not included in the revamped STI.

SGX chief executive Hsieh Fu Hua said: 'The introduction of Singapore indices using globally recognised and accepted methodology will ensure that we fulfil the investment and benchmarking needs of international investors.

'This will also facilitate the creation of index-linked products, offering greater investment options in our marketplace.'

Donald Keith, deputy chief executive of FTSE, said that the new indices would give investors 'a much more precise and comprehensive way of looking at the Singapore market'.

There are three separate indices for the real estate sector alone, including one to track the performance of real estate investment trusts. 'The indices will be used not only to promote the Singapore market globally but, over time, we hope they will attract international listings as well,' Mr Keith said.

The revamped STI is expected to be published in parallel with the current version from September and the new indices from October to give investors time to get used to the change before the full switch is made in December, he said.

The indices will be reviewed half-yearly, in March and September.