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In response to Malaysia’s market initiatives to enhance its capital market and liquidity, the FTSE Bursa Malaysia Index Advisory Committee has approved the move to a semi-annual liquidity review of the FTSE Bursa Malaysia Index Series. The increase in frequency of the liquidity review from an annual to a semi-annual basis is one step further in evolving the index series to better reflect the liquidity of the investable market.
Indices play an increasingly important role in markets today as a tool for stimulating domestic investment and attracting global capital flows. For this reason, the index eligibility criteria are important considerations for investors who expect the index constituents to have sufficient liquidity to enable easy and efficient trading. An increase in the frequency of the liquidity review for the FTSE Bursa Malaysia Index Series will provide more robust indices that are in tune with the market liquidity. This will align with the needs of global investors and increase the profile of listed companies which meet these criteria.
Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia said, “Liquidity is a key area of focus for Bursa Malaysia and the more frequent market reviews will enable market participants to track the index in a broader and more comprehensive manner. This will also allow investors to have a closer assessment on the performance of the public listed companies to create a more efficient market.”
Paul Hoff, Managing Director, Asia Pacific from FTSE Group added, “As an index provider, it is important to work with the investment community and local index partners such as Bursa Malaysia to understand the needs of both domestic and international investors, ensuring these needs are addressed through a robust index methodology. We have found that more frequent reviews aid investment professionals who track the indices by improving the replicability of the index.”
The liquidity review will be conducted semi-annually in June and December starting from June 2010 based on turnover in the twelve months prior to the review. Constituents of the FTSE Bursa Malaysia Small Cap Index and FTSE Bursa Malaysia Fledgling Index will also be reviewed semi-annually starting from the June 2010 review. For more information on the FTSE Bursa Malaysia Index Series, including the liquidity screening methodology, please visit www.ftse.com/bursamalaysia.
