KUALA LUMPUR (April 3): Bursa Malaysia’s proposal to expand the FTSE Bursa Malaysia KLCI (FBM KLCI) to 50 constituents from the current 30 could broaden market representation, improve sector diversification and potentially lift benchmark returns, according to CIMB Securities. 

In a strategy note on Friday, CIMB said the proposed expansion, currently under consultation with FTSE Russell, would raise the benchmark index’s market capitalisation coverage to 70% from 60%, offering investors a more comprehensive gauge of the domestic equity market. 

The consultation period runs until April 24, with implementation targeted for Dec 21, 2026 or June 21, 2027, subject to feedback. 

The research house said the move would also help reduce the FBM KLCI’s current concentration in financial services and utilities, sectors that presently dominate the index. 

Based on a simulation using market data as at March 31, 2026, the weighting of financial stocks could fall to 37% from 43%, while utilities may decline to 13% from 15%. 

“The proposed changes are positive as they improve market representation and industry diversification,” CIMB said, adding that a hypothetical 50-stock benchmark would have outperformed the current 30-stock index by around 60 points on an annualised basis over the period from June 2016 to December 2025. 

Under the expanded index, sectors such as real estate, industrials, energy, healthcare and technology are expected to gain greater prominence. 

Indicative additions include Dialog Group Bhd (KL:DIALOG), KPJ Healthcare Bhd (KL:KPJ), TIME dotCom Bhd (KL:TIMECOM), IJM Corp Bhd (KL:IJM), IGB Real Estate Investment Trust (KL:IGBREIT) and United Plantations Bhd (KL:UTDPLT). 

CIMB noted that the change is likely to trigger one-off rebalancing flows from passive and index-tracking funds, with potential outflows from heavyweight banking and utility names such as Malayan Banking Bhd (KL:MAYBANK), Public Bank Bhd (KL:PBBANK), CIMB Group Holdings (KL:CIMB) Bhd and Tenaga Nasional Bhd (KL:TENAGA), whose weightings would be diluted under the broader benchmark. 

The proposal also includes a 10% cap on individual constituent weightings and a reduction in the FBM70 index to 50 stocks, which will be renamed the FBM50 index.