Which high cap stock will replace Maxis on KLCI?

Below was extracted from The Star for you reading pleasure :-

PETALING JAYA: The Kuala Lumpur Composite Index (KLCI) is going to miss some significant members with Maxis Communications Bhd on its way out of Bursa Malaysia alongside Island & Peninsular Bhd (I&P) and Malakoff Bhd, which are also being taken private by their respective owners.

The three companies have a combined capitalisation of close to RM50bil, representing almost 7% of the benchmark's total market capitalisation (market cap) based on yesterday's closing prices.

Maxis closed RM2.30 higher at RM15.30 while I&P and Malakoff were unchanged at RM2.33 and RM10.30 respectively.

Earlier this week, business tycoon T. Ananda Krishnan made a 20% premium offer of RM15.60 per share to take full control of Maxis.

Last week, Permodalan Nasional Bhd announced plans to take I&P private by buying the remaining shares it does not own for RM2.35 each.

Malakoff, on the other hand, will be delisted at the end of this month on completion of the sale of its assets to parent MMC Corp Bhd.

A fund manager noted that the liquidity in these counters would have to be distributed elsewhere. “It means more money will be going into other index-linked counters,” he said.

While the funds could move to new entrants to the benchmark index, there were not many blue chips that were not already part of the KLCI, the fund manager added.

Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said in an e-mail reply to StarBiz that the exchange would implement “a standard process'' to replace any index-linked stocks that had been de-listed.

“The number of index constituents in the KLCI is fixed at 100. The weightage of each constituent is distributed by way of market cap, with bigger companies assuming higher weightage,” he added.

A head of research at a local brokerage said: “Ultimately it depends on how Bursa wants to replace the companies. The new entrants don't have to be of similar size to those that are being dropped.''

He said based on sectors, YTL Power Bhd could represent the power industry and Green Packet Bhd the telecommunication sector.

Other potential candidates were Nestle (M) Bhd, Dutch Lady Milk Industries Bhd and JT International Bhd, the research head said.

“Liquidity and free float could be an issue. But there are stocks on the KLCI currently which are low in liquidity.

“Market capitalisation is probably one of the biggest single factors,'' added Pong Teng Siew, head of research at MIMB Investment Bank.