The Philippine Stock Exchange Inc. (PSE), the operator of the equities trading market, has implemented a number of changes related to its rules for inclusion in its 30-company benchmark PSE index (PSEi).
Some of the changes include the adoption of a 98-percent market capitalization threshold system and exemption to the minimum float requirement.
‘The changes are part of the exchange’s initiatives to ensure that the PSE indices remain aligned with global standards and responsive to evolving market needs,’ the PSE said in a memorandum it released on Tuesday.
These changes are scheduled to take effect during the February 2027 index rebalancing period.
One of the major changes is to include only companies that fall within the top 98 percent of the cumulative total market capitalization in the PSEi, PSE Dividend Yield, PSE MidCap and sector indices. The said rule is an added criteria for index inclusion.
The PSEi is composed of a fixed basket of 30 companies. The selection is based on a specific set of criteria set by the bourse. The PSEi measures the relative changes in the free float-adjusted market capitalization of the 30 largest and most active common stocks listed at the PSE.
By gauging changes in the stock prices of select listed companies, the PSEi provides a snapshot of the market’s overall condition.
The last time the liquidity criteria was tweaked was in April 2011.
The PSE is also implementing the Median Trading Activity Ratio (MTAR) and Monthly Average Daily Value Turnover (MADV) as new liquidity measures, to determine the tradability of shares.
The MTAR is the 12-month cumulative sum of the monthly trading activity ratios. Each monthly trading activity ratio shall be calculated by multiplying the median daily value traded by the number of days the security was traded during the month, with the resulting product divided by the company’s free-float market capitalization as of the end of that month.
To become eligible for the main index, a company must have an MTAR of 15 percent.
The MDAV, meanwhile, is the total value traded during the month by the number of trading days in the month.
Previously, liquidity is assessed based on median daily trading value during each month of the 12-month review period.
The PSE is also introducing an exception to the minimum free float requirement, as it prepare for the entry of GCash parent Mynt Inc. into the main index. The PSE will reduce minimum ownership to 15 percent from 20 percent, but only for companies with a market capitalization of at least P250 billion, provided all other index inclusion criteria are satisfied.
Mynt is set to go public in October this year.