Thursday, January 22, 2009

No More KLCI

In near future 6 July 2009, KLCI will NO longer be used as the index for KLSE.  It will be replaced by FTSE Busra Malaysia - FBM KLCI, or FBM30 which consist of 30 stocks, instead of 100 in KLCI.

Stock in FBM30 but not in KLCI in favor : Resorts, YTL, Parkson ...
The drop outs may not in favor : Gamuda, SP Setia ...

Bear in mind one of the fundamental fund manager portfolios is usually an index fund.  And they are benchmarking their fund performance with country's index ie. KLCI in the past.  Changing the country's index components means the fund managers may have to change their strategy too.

Generally this is good news ....  to general public especially mutual fund investors.  What will happen in short term is the not-so-good index fund will drop significantly but eventually all index fund are performing quite the same ....

2 comments:

Carson Ding said...

Hmmm... this is not good. Creating the new index means we don't have a past historical chart to study the trendline.

It would be hard to know the future direction of those new indexes. With the current KLCI, I have been able to identify the trend using the Elliot Waves method.

What's the purpose anyway to create this new index?

Michael Tsen said...

sorry I didn't elaborate in details, actually there is a mechanism where the old and new index will 'join' pretty well. The same type of index changing exercise has been common in many developed regions, Msia is just copying the process seeing that 'some' of the old 100 index companies are actually 'not that index'

more news and details will be published eventually. if I found those link I will update this post here ...

anyway you should be able to continue using the wave without any change actually.