PSE weighs comments on proposed index changes

MANILA, Philippines — The Philippine Stock Exchange (PSE) will review the inputs it received from key stakeholders on the potential revisions to its index policy, then decide if any adjustments will be necessary, its president and CEO Ramon Monzon said.

He said the comment period has recently ended on the PSE’s proposed changes to its index policy.

Monzon, however, declined to provide a timeline as to when the PSE will institute any changes to its index policy.

“We will take a look first what the comments were. We’ll discuss it. And then we’ll probably just drop it or do something,” he said.

The PSE last month solicited comments from key stakeholders such as fund managers and certain foreign and local brokers on possible revisions to its index policy.

However, the PSE noted that only after such comments are received and evaluated will the company consider if there is even a need to change its present index rules.

“It’s just sounding off only,” Monzon said.

“As you know, we solicited comments, but selected only. Because how many companies have index tracker funds? There are only a few. So we sent it to the big ones, BPI, Sun Life, Philequity, then we asked some big brokers to give us comments. You cannot ask 120 brokers for comments, that’s unmanageable,” he said.

One of the proposed changes is the easing of the public float rule for inclusion in the index, wherein companies worth at least P120 billion will be allowed to stay in key stock indexes even if only 15 percent of their shares are publicly traded, lower compared to the 20 percent currently required.

The move increases the likelihood that large and liquid companies can be included in the PSE indexes even if their free float is lower than the minimum free float requirement for index inclusion of 20 percent.

“The proposed changes, I think one of them is to reduce the float requirement. If you’re north of P120 billion in market capitalization, it will be down to 15 percent. If that is adopted, that would allow AboitizPower to be added because the free float is no longer 20 percent. And they’re also doing that to make it more attractive for GCash to list,” COL chief equity strategist April Tan said.

Tan, however, said that there were many things that were raised about the proposal which might lead the PSE to “go back to the drawing board to come out with something a little bit better.”

“When will this be implemented? I don’t know. But maybe not soon,” Tan said.

“So maybe they will have to go back to the drawing board and review the criteria better. One thing is for example, making it a static P120 billion. What about five years, 10 years from now? Is P120 billion still a large enough market capitalization?” she said.

Early this year, the PSE announced the inclusion of two new firms – China Banking Corp. and AREIT Inc. – in the main 30-company PSE index as a result of the January to December 2024 index review, which took effect on Feb. 3, 2025.

The companies replaced Nickel Asia Corp. and Wilcon Depot Inc. which became constituents of the PSE MidCap index.

The PSE said that a listed firm must be among the top companies in terms of liquidity and market capitalization to qualify for inclusion in the indexes.

Further, it should maintain a free float level of at least 20 percent of its outstanding shares. Relevant financial criteria are likewise considered by the PSE in evaluating the index composition.