“I don’t think it’s the time to reinvent the wheel. The current index policy has worked just fine, so the proposed changes seem unnecessary,” Juan Paolo Colet, the managing director at China Bank Capital, told InsiderPH.
“Moreover, given that this would be a major overhaul of the present model, we need to be very careful that we do not inadvertently create sources of market distortion,” he added.
Championing wider ownership
Colet has consistently championed broader public ownership in the stock market, which he sees as critical to improving transparency and expanding investor participation.
He expressed particular concern over the PSE’s proposal to lower the free float requirement from 20 percent to 15 percent.
“First, we should be incentivizing larger public floats rather than the reverse,” Colet said.
“Second, there is something counterintuitive with the logic that a larger market capitalization warrants a lower free float for purposes of index inclusion: it effectively promotes non-public ownership concentration rather than broader market participation in wealth creation,” he added.
What the PSE said
In a statement to InsiderPH, the PSE said it’s still in the process of gathering comments from market stakeholders.
“Only after such comments are received and evaluated will PSE consider if there is even a need to change its present index rules,” it said.
“If and when PSE decides to institute any changes to its index policy, the appropriate announcement will be made and ample time will be provided before implementation,” it added.
Potential winners, losers
The PSEi, comprised of the country’s 30 largest and most actively-traded companies, is reviewed twice per year.
Wendy B. Estacio-Cruz, research head at Unicapital Securities, said stocks such as China Bank and San Miguel are at risk of being removed, but other names might be included.
“This adjustment could allow Aboitiz Power (AP), which has a P284B market cap and a 17.5 percent float, to be reinstated into the index. UnionBank (UBP), could qualify if its share price rises 10 percent to cross the P120 billion mark,” Estacio-Cruz told InsiderPH.
“Similarly, this lower float requirement may ease index entry for San Miguel Food and Beverage (FB), which currently has an 11 percent float and would only need to raise it by 4 percent instead of the previous 9 percent to become eligible,” she said.
Good for an IPO-bound GCash?
“This change may also facilitate a potential GCash IPO and index inclusion if the SEC permits a sub-20 percent float,” Estacio-Cruz said.
GCash is currently weighing an IPO and had previously raised concerns about meeting the 20 percent public float requirement for new listings.
In response, the PSE and Securities and Exchange Commission allowed exemptions to lower the public ownership threshold to 15 percent as long as firms commit to raise this to 20 percent within two years.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
