The PSE Index is the market’s flagship basket of leading listed companies.
Think of it as the Michelin Guide of Philippine companies. Making the cut on the PSEi or any of the other indices is a badge of prestige and visibility.
At the top are firms like tycoon Enrique Razon Jr.'s International Container Terminal Services, the Sy family's SM Investments, Ayala, Jollibee, San Miguel and Gokongwei-backed JG Summit.
These stocks are tracked by local and global investment funds, making inclusion highly coveted as it boosts a company’s profile and fund flows. Getting kicked out can be just as painful, forcing funds to sell—apart from bruising some egos.
An insider, speaking on condition of anonymity, said the review began after officials spotted weaknesses in the existing methodology.
This was exposed during one such index rebalancing, which happens twice a year.
A newly added stock surged sharply in a single day as funds tracking the index scrambled to buy shares.
While stocks typically rise after joining the index, the intensity of the jump suggested that while some firms might meet the public float requirement, few of the shares were actually being traded. This resulted in the price being pushed higher than expected.
“There’s something wrong when the public float is not really representative of the stock,” the insider said.
That prompted the PSE to benchmark its rules against global index providers such as MSCI.
Instead of relying heavily on public float, the exchange introduced new trading activity tests to identify more liquid stocks.
The exchange also narrowed the pool of eligible companies and eased the public float requirement for the largest firms.
Global funds that trade in huge volumes will surely be unhappy with the lower public floats, but the PSE believes the new rules will create a more stable and representative index.
The new methodology comes into effect for the February 2027 rebalancing.
This means the August index changes will use the existing rules, but as early as now speculators are making bets on who might be included.
According to market chatter, this is why stocks like Aboitiz Power and Synergy Grid & Development Phils. rallied hard on Tuesday, while firms like China Banking Corp. and DigiPlus Interactive eased as they were put on the deletion watchlist.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
