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New benchmark to be part of FTSE ST family of 19 indexes - Jun 06, 2007 (ST)

BackJun 06, 2007

The Straits Times / The Business Times News On SPH

New benchmark to be part of FTSE ST family of 19 indexes

Investors can track individual sectors better, giving more breadth and depth to market.

By Alvin Foo
Jun 06, 2007
The Straits Times

 

THE revamped Straits Times Index (STI) will be complemented by a family of 18 new FTSE ST indexes that will enable investors to better track the performance of red-hot sectors such as property, as well as zoom in on the day's action in penny or China stocks.

And this will add more breadth and depth to the market, said market players yesterday.

At the same time, listed companies will also get better exposure and coverage, said the Singapore Exchange (SGX).

'The number of listed companies that will be included on indexes will rise from 50 to over 200,' said SGX assistant vice-president for listings Tan Suan Hui.

She was speaking at a joint media conference by the SGX, Singapore Press Holdings (SPH) and the FTSE Group yesterday.

At the event, the three companies inked a new partnership that will see a revamped STI and 18 other new FTSE ST indexes launched by year-end.

The number of constituent stocks in the STI will be reduced from 49 to 30, making the STI a highly liquid blue-chip index. Stats ChipPac was dropped last Friday, after Temasek Holdings' takeover offer.

The STI will be complemented by two more indexes:

An FTSE ST Mid Cap Index, which will comprise the next 50 companies by full market capitalisation; and

An FTSE ST Small Cap Index, that will include all other companies within the top 98 per cent by full market capitalisation, which are not large enough to be in either the STI or FTSE ST Mid Cap Index.

An FTSE ST All-Share Index will cover 98 per cent of the Singapore stock market's capitalisation, via all three indexes, while the remaining 2 per cent representing the market's smallest stocks will be included in an FTSE ST Fledgling Index.

In addition to this, there will also be 13 sector indexes - oil and gas, basic materials, industrials, consumer goods, health care, consumer services, telecommunications, utilities, financial, technology, real estate, real estate holding and development and real estate investment trusts.

Finally, an FTSE ST China Index will also be created, tracking the performance of China-related companies listed on the SGX.

Industry players welcomed the impending changes, saying that the move is timely, given the recent highs on the local bourse.

CIMB-GK research head Song Seng Wun told The Straits Times: 'This will provide more barometers, and it will be a fairly useful exercise for everybody - especially for the retail investors who will have a lot more accessible information in terms of market coverage.'

'This added information will mean an even more level playing field for them,' he added.

Highlighting the FTSE ST China index, Mr Song said: 'That'll give Singapore investors a clearer picture whether China stocks here are undervalued, especially when mainland China stocks are flying off like a rocket.'

The new indexes are especially useful, given today's market realities, noted Mr Patrick Daniel, SPH's editor-in-chief for English and Malay newspapers.

'Sometimes you know a particular segment of the market is hot, but that is not adequately captured in an all-encompassing index.

'With the revamp, we'll have many more indexes that are more precise, that will track different market segments,' he added.

'We'll know on a daily basis, which parts of the market are up, which parts are down. That'll be reflected in our daily reporting.'

Test values of the new indexes will be available on the FTSE and SPH websites by October.

And by the end of the year, there will be a switchover to the 19 new indexes.

All three partners said yesterday that they were confident the new indexes would spawn new investment products.

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

Said the FTSE Group's deputy chief executive Donald Keith: 'We expect the series will be used as the basis of new investment products.'

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