The affected stocks are Axiata Group Bhd, YTL Corp Bhd, Petronas Dagangan Bhd, and Nestlé (Malaysia) Bhd, while QL Resources Bhd, and Mr DIY Group Bhd will be shunted to the MSCI Malaysia Small Cap Index.
In addition, NationGate Holdings Bhd, Sunway Healthcare Holdings Bhd and UEM Sunrise Bhd will be removed from the Malaysia small-cap index while AirAsia X Bhd and KLCC Property Holdings Bhd will be added to the index.
MSCI said all the changes will be effective at the close of May 29. MSCI indices are rebalanced every three months on the final trading day of the quarter.
MSCI did not state the reasons why the stocks were dropped but typically stocks are removed from its country indices to ensure the benchmarks accurately reflect the state of the markets.
The main reasons for deletion include significant drops in market capitalisation, low liquidity, reduced foreign ownership accessibility, or failure to meet free-float requirements.
The most common reason is a company’s market capitalisation falling below the minimum threshold required to be in the standard index. This usually happens when a company’s shares drop significantly due to poor earnings, industry challenges, or market corrections.
Since the last rebalancing, home improvement chain operator Mr DIY has lost over 10% of its market value while QL Resources, which sells seafood products and operates FamilyMart stores, dropped 8%.
Nestle Malaysia, a unit of the Swiss food-and-beverage giant, fell nearly 9% while Petronas Dagangan fell just over 6% during the period.
MSCI indices are closely watched by fund managers and international investors.
Deletion from an MSCI index can lead to forced selling by passive funds that mirror these benchmarks, often causing a sharp drop in the stock’s share price and triggering short-term volatility. Retail investors will also typically reduce their holdings of affected stocks.
The market did not react much to the news as the shares of the six stocks remained largely stable this morning.
However, things could change as institutional funds rebalance their holdings of these stocks in the run up to the May 29 exclusion deadline.