Asia Plus Sec. Expects Banking Stocks to Gain the Most from SET’s Free Float-Adjusted

SET expects to revise the SET50 and SET100 indices’ calculation methods, removing stocks with a low free float and/or being placed in the cash balance. According to analysts, DELTA is expected to be excluded from both the SET50 and SET100, while the remaining ten stocks, including BBL, SCB, KBANK, SCC, BDMS, CPALL, CPN, BANPU, MINT, and LH, are expected to be weighted up by passive fund investment. Additionally, BAM is expected to re-list on SET50.

The Stock Exchange of Thailand (SET) held an open hearing on revising the SET Index calculation methods. If the new Free Float Adjusted Market Cap criterion for calculating SET50 and SET100 is implemented, BANPU and KKP are expected to be included in SET50, while GLOBAL and DTAC may be excluded.

Asia Plus Securities (ASPS) stated that the index calculation methods will be revised to reflect actual trading and to reduce volatility from stocks with a low free float, in accordance with international standards, and will likely take effect in December 2021 at the earliest. SET seeks to use the free float adjusted market capitalization method to reflect actual investment liquidity in that month, while stocks subject to surveillance measures (Cash Balance or Turnover List) will be excluded from the liquidity calculation to reflect normal trading.

There are eight SET100 stocks in Cash Balance status during the 1H22 calculation period. DELTA has been in Cash Balance status for more than seven months, so it will meet the liquidity criteria for only five months, failing the minimum requirement of six out of twelve months. Under the new calculation method, DELTA is anticipated to be excluded from both SET50 and SET100.

ASPS believes that the Free float adjusted market capitalization method will affect market weight by 11%. The banking sector (BANK) will weigh up the most by 5.6% from 9.3% to  14.8%, followed by the construction materials sector (CONMAT) (+1.5%) and the property development sector (PROP) (+1.4%).

The top ten stocks that will be weighed up the most are 1. Bangkok Bank (BBL) is expected to weigh up from 1.3% to 2.7%, so passive fund investment in BBL may weigh up by 109%, 2. the Siam Commercial Bank (SCB), 3. the Siam Cement (SCC), 4. Kasikornbank (KBANK), 5. Bangkok Dusit Medical Services (BDMS), 6. CP All (CPALL), 7. Central Pattana (CPN) 8. Banpu (BANPU) 9. Minor International (MINT) and 10. Land and House (LH).