KUALA LUMPUR (Nov 22): Hartalega Holdings Bhd and Top Glove Corp Bhd are likely to be replaced by AMMB Holdings Bhd and QL Resources Bhd in the upcoming KLCI constituents review in December, said CGS-CIMB Securities.
In a note on Monday (Nov 21), the research firm said that based on Refinitiv market data at the close of trading on Nov 21 (review date), Hartalega and Top Glove have fallen to 36th and 40th in market capitalisation, respectively, among the eligible main market securities.
It said that based on the ground rules of Bursa Malaysia, a security will be deleted if it falls to the 36th position or below among eligible securities.
“We think AMMB and QL Resources, which are ranked 27th and 28th in market capitalisation among eligible securities, could gain entry into the KLCI index by being the two highest-ranking eligible companies that are not presently included in the KLCI.
“Their inclusion will be to match the number of companies to be deleted from the KLCI index,” it said.
CGS-CIMB said Hap Seng Consolidated Bhd, which ranked a higher 24th in market capitalisation, may not qualify for inclusion as house calculations suggest that it has not met the liquidity test.
The research house said that apart from market capitalisation criteria, companies need to have a free float (share capital of the company that is freely available for trading) of 15% or more, and pass a liquidity screening test to qualify for KLCI inclusion.
“We estimate that AMMB and QL Resources could have a potential KLCI weightage of 1.8% and 1.3%, respectively, against Top Glove’s 1.1% and Hartalega’s 0.7%.
“AMMB and QL Resources could gain investor interest due to their potential inclusions. We have Add calls on both.
“There could be short-term selling pressure on Top Glove and Hartalega, if they are excluded from the KLCI; we currently have a Hold rating for Hartalega and a Reduce rating for Top Glove.
“This would also mean glove players will not be represented in the KLCI, while the bank and consumer sectors will see higher weightage in the KLCI,” it said.