KUALA LUMPUR (Aug 21): The FBM KLCI’s expansion to 50 constituents could redirect index-related flows away from traditional heavyweights like banking and utilities towards other currently under-represented sectors like technology and construction, analysts said.

“Banks and utilities account for 43.1% and 16.4% of the index respectively, while technology has no representation”, Apex Research said in a note. 

“Technology and construction should be the clearest sector beneficiaries from broader benchmark representation,” it added.

CIMB Securities’ simulation puts financial services weightage falling to 36.8% from 42.8%, and utilities falling to 15.8% from 18.8%. Real estate, industrials, energy, consumer and technology sectors are all expected to see increased representation and weightage.

The two-stage transition however, could create a “possible transitory overhang” for existing members Hong Leong Investment Bank (HLIB) said, as the current 30 constituents combined index weight is diluted from 100% today to 91.3% in December and down to 84% by June 2027.

The first stage in December 2026 will see 20 newly added constituents be included at 50% of their final index weight in the review, while the remaining 50% of the weight will be implemented at the June 2027 index review, according to a joint statement from Bursa Malaysia and index provider FTSE Russell on Thursday.

HLIB expects technology to be the largest beneficiary among newly represented sectors, reaching an estimated 3.4% weight after the second stage in June 2027 from zero currently.

On specific counters, CIMB Securities’ simulation shows that Malayan Banking Bhd (KL:MAYBANK), Public Bank Bhd (KL:PBBANK), CIMB Group Holdings Bhd (KL:CIMB) and Tenaga Nasional Bhd (KL:TENAGA) would absorb the largest weight cuts among existing constituents.

On which stocks stand to be promoted, HLIB and CIMB Securities modelled overlapping candidate lists. 

The overlapping stocks include Westports Holdings Bhd (KL:WPRTS), United Plantations Bhd (KL:UTDPLT), ViTrox Corp Bhd (KL:VITROX), Sime Darby Bhd (KL:SIME), QL Resources Bhd (KL:QL), KPJ Healthcare Bhd (KL:KPJ), Dialog Group Bhd (KL:DIALOG), TIME dotCom Bhd (KL:TIMECOM), Sunway Construction Group Bhd (KL:SUNCON), IJM Corp Bhd (KL:IJM), Genting Malaysia Bhd (KL:GENM) and Alliance Bank Malaysia Bhd (KL:ABMB).

The final line-up however hinges on share prices and FTSE eligibility criteria as at the Nov 23 cut-off, ahead of the official announcement on Dec 3.

One less obvious beneficiary is Bursa Malaysia Bhd (KL:BURSA) itself, according to HLIB. 

The bourse earns fees on trading volume, and this round of changes should drive an unusually large spike as at least 40 stocks are reshuffled across the KLCI and FBM70 combined, the research house said.

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