Bursa Efek Indonesia (BEI) removed 82 high shareholding concentration (HSC) stocks from the calculation of the Jakarta Composite Index (IHSG) effective Monday, 2 November. The exclusion follows MSCI opening a consultation on reclassifying Indonesia’s stock market from emerging market to standalone market. The index starts from the previous close of 5057 points, and BEI said the exclusion does not change that opening level.
After the change, 881 stocks remain in the index, down from 963. The excluded stocks account for 18 percent of the index weight and 30 percent of total market capitalisation. BEI said the weight of the removed stocks will be distributed to the remaining constituents.
Where the weight goes
Jeffrey Hendrik, the president director of BEI, said the weight of the excluded stocks would be redistributed among the remaining constituents. He said the exclusion would not change the index weight at the opening of trading.
Analysts said the removal would not translate directly into an index move.
Analysts split on the effect
Elandry Pratama, branch manager at Panin Sekuritas Pondok Indah, said the 18 percent weight cannot be read as the index correcting by 18 percent. He said changes in composition and weight do not always affect the index level in proportion.
Harry Su, managing director of research at Samuel Sekuritas Indonesia, said HSC stocks had posted the largest declines, so removing them would lift the index. Nafan Aji Gusta, senior technical analyst at Mirae Asset Sekuritas, described the move as a step to improve the quality of the index and said it does not automatically push the index up or down.
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Source: Bursa Efek Indonesia (BEI)
