New rules put spotlight on Jardine stocks
From September, the Straits Times Index (STI) constituents must be more actively traded to be part of the benchmark.
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Jamie Lee
30 May 2015
From September, the Straits Times Index (STI) constituents must be more actively traded to be part of the benchmark.
This puts the spotlight on the stable of companies under the Jardine group that have been on the STI for years despite their stocks being traded thinly.
Under the new rule, the securities that would be considered for the benchmark must have a trading volume that is at least 0.1 per cent of their issued shares.
The percentage will be based on their stocks' median daily trade per month in 10 of the 12 months before the bi-annual review. The review takes place in March and September.
This is double the turnover liquidity of 0.05 per cent that is currently expected from would-be constituents.
For existing constituents, their securities on the STI must trade at least 0.08 per cent of their shares in eight of the 12 months before the review. This is also double from current requirements.
Three firms from the Jardine group - Jardine Strategic, Jardine Matheson and Jardine Cycle & Carriage - are in the benchmark, but the traded volume typically does not breach a million shares.
Based on S&P Capital IQ data of the three-month average trading volume of these stocks, the securities are likely to be dropped from the index if the stocks continue to be as thinly traded.
Singapore Press Holdings, Singapore Exchange and FTSE Russell on Friday said these tighter liquidity rules came after market consultation, where there was "widespread support" for a higher liquidity requirement for index stocks.
With this change, the STI will continue to be the blue-chip market benchmark, but the large-cap portion of the FTSE ST All-Share will be combined with the Mid-Cap Index to create a new FTSE ST Large & Mid Cap Index.