KUALA LUMPUR (May 15): MSCI Malaysia Small Cap Index’s latest rebalancing could result in selldown of up to RM146 million in the six stocks to be removed, according to CIMB Securities’ estimates.
The non-strategic foreign shareholdings in the stocks, including Sports Toto Bhd (KL:SPTOTO) and UWC Bhd (KL:UWC), are between 4.7% and 17.7%, according to CIMB Securities’ analysis. Together, the six counters account for about 4.4% of the index’s free float-adjusted market capitalisation.
“This development is negative for the excluded stocks, as it could trigger selling by passive funds that closely track the index,” CIMB Securities said.
Other constituents to be removed are Pentamaster Corp Bhd (KL:PENTA), British American Tobacco (Malaysia) Bhd (KL:BAT), D&O Green Technologies Bhd (KL:D&O), and Dayang Enterprise Holdings Bhd (KL:DAYANG).
The constituents of the MSCI Malaysia Index, which tracks large- and mid-cap stocks and represents 85% of the Malaysian stock market, will remain unchanged.
The indices are closely watched by fund managers and foreign investors. An exclusion from the indices can trigger outflows, as passive investors sell the former constituent in their portfolios to mirror the benchmarks.
All changes to the MSCI indices will be effective at the close of May 30, 2025, the index provider said. The next review has been scheduled for Aug 7, 2025.
MSCI indices are rebalanced every three months on the final trading day of the quarter. MSCI will add or remove stocks based on specific criteria, such as size and liquidity, to ensure the indices stay relevant as the benchmarks of the markets they represent.
Broadly, CIMB Securities said international funds could return to the Malaysian equity market, given the low foreign shareholding of 19.4% and improving market sentiment, following the de-escalation of the US-China tariff trade war.
The sectors most likely to benefit from foreign inflows are financial services, utilities, and consumer, which have experienced the largest net foreign outflows year-to-date, CIMB Securities noted.