In June 2025, a draft simulation from the Philippine Stock Exchange (PSE) was leaked, revealing how new guidelines could impact the composition of the Philippine Stock Exchange Index (PSEi).

The leaked document suggested that San Miguel Corp. and China Banking Corp. could be removed from the PSEi, while Aboitiz Power and Wilcon Depot might be added. Word of the simulation quickly spread among trading groups, leading to massive price swings for the companies mentioned. China Bank’s shares plummeted over nine percent in a single day, while Aboitiz Power’s stock gained nearly four percent. Wilcon also saw a slight increase, while San Miguel slipped.

The PSE quickly clarified that the results were not final and that the new guidelines were still in the drafting phase. The simulation was intended for consultation purposes only, and no final decisions had been made. Fund managers, brokers, and other stakeholders were invited to provide feedback on the proposed rules.

“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 stated.

Two months later, on Aug. 8, 2025, the PSE announced the results of its regular index review, which determines which stocks are added to or removed from the PSEi.

How many of the “hotly traded” leaked stocks were included in this review? None. San Miguel and China Banking Corp. were not removed. Aboitiz Power and Wilcon Depot were not added. The frenzy surrounding the initial leak turned out to be for nothing.

Interestingly, the official announcement had a much smaller impact on the market than the leak. Only Aboitiz Power seemed to react to the news (or lack thereof), with its stock price dropping by 3.61 percent on the day of the announcement.

So, why did the leak have such a large effect on the mentioned stocks? To understand this, we must first define what an index is.

An index is a list of securities that represents a specific part of the market. Indices are useful for quickly gauging market performance. For example, to understand how the Philippine stock market is doing, you don’t need to analyze data from every single company. You can simply look at the PSEi.

Different indices follow different rules. The PSEi, for instance, represents the top 30 publicly traded Filipino companies. In contrast, the S&P 500, which represents the U.S. stock market, includes the top 500 American companies. Each index has its own criteria for what constitutes a “top company.”

Being included in an index is a big deal because many large institutional investors limit their investments to stocks within an index. Some funds, known as index funds, are designed to mirror the contents of an index, while other funds have investment policies that restrict them to index-based stocks.

When a company is added to an index, these institutions buy its shares, increasing demand and pushing up the stock price. Index inclusion also attracts more investor attention, broader analyst coverage, and improved liquidity as more people trade the stock. Conversely, when a company is removed, index-tracking funds are forced to sell, which can negatively impact the stock’s price and visibility. The stocks in the leaked PSEi simulation moved because traders anticipated institutional investors would either buy or sell based on their inclusion in the index.

The PSEi is a valuable tool widely used by the media, analysts, and fund managers as a barometer of the market’s health. It also has a big influence on individual stocks. Inclusion in the index means more institutional demand, while removal means less. What changes will happen in the next index review? We can only guess, as even seemingly convincing leaked documents can turn out to be wrong. Only time will tell which companies will make the list!