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Manila Bulletin devider Business devider The Stock Market devider Leaked index proposal rocks PSE

Leaked index proposal rocks PSE

Free float, liquidity rules under review

Published Jun 5, 2025 08:01 pm
The Philippine Stock Exchange is seeking input from select market players on proposed changes to the criteria for inclusion in the bourse’s benchmark and other indices, but a leak resulted in a plunge in the share price of China Banking Corporation.

The proposal sent to some fund managers as well as select foreign and local brokers included a simulation using the proposed criteria, which showed that Chinabank and San Miguel Corporation would be removed while Aboitiz Power Corporation and Wilcon Depot would be added.

Stock traders said the leak sparked off foreign selling in Chinabank shares, which caused its share price to fall 9.13 percent to ₱65.70 from its closing price of ₱72.30 in the previous day.

On the other hand, AboitizPower saw its share price rise 3.94 percent to ₱39.60 from its closing price of ₱38.10 last Wednesday.

After trading closed, the PSE issued a statement admitting that it solicited comments from key stakeholders (fund managers and certain foreign and local brokers) on possible revisions to its index policy.

“Only AFTER such comments are received and evaluated will PSE consider if there is even a need to change its present index rules. If and when PSE decides to institute any changes to its index policy, the appropriate announcement will be made and ample time will be provided before implementation,” the bourse said.

Some stock traders said this could have been avoided if there had been more transparency in the solicitation of comments.

Among the proposed changes, the criteria for index inclusion include a reduction in the free float requirement to 15 percent from the current 20 percent for companies with a market capitalization of more than ₱120 billion.

The PSE explained that lowering the minimum public float requirement for firms with large market capitalizations “increases the likelihood that large and liquid companies can be included in the PSE indices even if their free float is lower than the minimum free float requirement for index inclusion of 20 percent."

For the liquidity criteria, it is also proposed that the PSE will consider both median trading activity ratio (MTAR) and average daily value turnover (ADVT), while the current criteria use the median daily trading value.

The PSE stated that the MTAR addresses limitations in liquidity measurement by measuring the proportion of a company’s free float that is actively traded, providing a more accurate and proportional view of a company’s tradability compared to the current median daily trading value.

On the other hand, incorporating an ADVT requirement can offer a more thorough evaluation of baseline liquidity for index inclusion, thereby improving the assessment of investability.

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Philippine Stock Exchange (PSE)
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