SCUTTLEBUTT

Index now has 6 Ayala firms

The recent shakeup at the Philippine Stock Exchange (PSE) had Nickel Asia Corp. (NIKL) and Wilcon Depot (WLCON) shifted from the benchmark PSE index to the Midcap index. The two scrips will be replaced by AREIT and China Banking Corp. (CBC).

Notably, AREIT will be the first REIT to be included in the PSE index (PSEi), highlighting the rising prominence of REITs as a viable investment instrument.

CBC, on the other hand, will be making an index comeback after its rather short-lived inclusion from 2010-2011.

CBC will be joining the Big 3 banks (Banco de Oro, Bank of the Philippine Islands (BPI) and Metrobank) on the PSEi, in line with its status as the fourth largest privately-owned bank in terms of assets. AREIT will be the sixth Ayala-owned company on the index, joining Ayala Corp, ACEN, Ayala Land Inc., BPI, and Globe Telecom, while CBC will be the fourth Sy-led company, joining BDO, SM and SMPH.

“The changes will be effective on 3 February, and we expect portfolio rebalancing activities to commence early and culminate on 31 January,” according to AP Securities.

AREIT and CBC’s combined free-float weighted market cap of P157.8 billion is significantly larger than NIKL and WLCON’s P30.2 billion, which may lead to considerable downweights across existing index names to accommodate the new entrants.

One stock likely to be spared from the sell-off is BPI, which may be upweighted due to its free-float increasing from 48.71 percent as of the last index rebalancing to 51.17 percent as of December 2024.

Typically, a correction follows portfolio rebalancing activities, so we can expect a retracement for the new inclusions and a short-term bounce for the removals. Additionally, we should anticipate a significant drop in the index on 31 January due to the expected downweighting of existing components.