5 Singapore Stocks Plummet After MSCI Index Removal

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The MSCI Singapore Index is 1 of nan largest Singapore indices pinch 16 constituents (formerly 21). The Index tracks astir of nan biggest Singapore companies, pinch their full marketplace capitalisation amounting to much than S$200 million.

As portion of MSCI’s quarterly review, it was announced connected 14 May 2024 that 5 Singapore-listed stocks would beryllium removed from nan MSCI Singapore index. These 5 stocks are successful a assortment of sectors specified arsenic REIT, Industrials and Real estate.

The removals will beryllium implemented astatine nan adjacent of 31 May 2024. However, this announcement led to an contiguous sell-off for these 5 stocks arsenic investors statesman to rebalance their portfolios. This guidance is besides because being removed from nan scale intends little optics and, much importantly, little organization investor money flows.

MSCI Singapore Constituents

The 21 existent and soon-to-be erstwhile MSCI Singapore Index constituents and their weights are arsenic follows. Most of these stocks are besides successful nan Straits times Index, pinch nan objection of Sea (NYSE: SE) and Grab (NASDAQ: GRAB) arsenic they are listed successful nan US.

Security NameIndex weight (%)Remarks
DBS GROUP HOLDINGS22.44 Remain
OCBC BANK15.49Remain
UNITED OVERSEAS BANK12Remain
SEA A ADR10.49Remain
SINGAPORE TELECOM6.37Remain
CAPITALAND INTEGRATED3.3Remain
SINGAPORE AIRLINES3.23Remain
KEPPEL3.14Remain
CAPITALAND ASCENDAS REIT3.11Remain
GRAB HOLDINGS A2.9Remain
SINGAPORE EXCHANGE2.52Remain
CAPITALAND INVESTMENT2.16Remain
SINGAPORE TECH ENGR2.08Remain
WILMAR INTERNATIONAL1.95Remain
GENTING SINGAPORE1.79Remain
SEMBCORP INDUSTRIES1.51Remain
MAPLETREE LOGISTICS1.51Removed
SEATRIUM1.27Removed
CITY DEVELOPMENTS0.94Removed
MAPLETREE PAN ASIA COMM0.93Removed
JARDINE CYCLE & CARRIAGE0.88Removed

These 5 stocks already had nan smallest weights successful nan index, adding up to 5.5% successful total. Their weight would beryllium distributed to nan different stocks successful nan index.

However, we should not presume that location will beryllium clear beneficiaries arsenic nan weight to beryllium distributed is excessively mini and location could beryllium an wide superior outflow from nan MSCI Singapore constituents arsenic location are little stocks successful nan scale now.

We tin besides spot nan displacement successful world attraction by noting that nan 3 largest additions to nan MSCI World Index, measured by afloat institution marketplace capitalization, will beryllium Microstrategy (USA), Pure Storage (USA) and Emcor Group (USA). The 3 largest additions to nan MSCI Emerging Markets Index, measured by afloat institution marketplace capitalization, will beryllium Chandra Asri Pacific (Indonesia), JSW Energy (India) and Canara Bank (India).

Performance of nan MSCI Singapore Index

The MSCI Singapore Index outperformed nan world scale from nan play of Apr 2009 up to early 2015 and has underperformed nan indices since pinch nan objection of 2017. This is apt owed to nan outperformance successful countries specified arsenic nan US.

Looking astatine nan fundamentals, MSCI Singapore has a 4.5% dividend yield, overmuch higher than nan world indices. The P/E and P/B ratios are besides overmuch much favourable. However, erstwhile we look astatine nan guardant P/E ratio, nan forecast is for nan world indices to person their net amended astatine a overmuch higher complaint arsenic compared to nan MSCI Singapore.

As nan marketplace is guardant looking, this whitethorn further measurement connected nan capacity of MSCI Singapore.

What will hap to these 5 stocks?

While nan first guidance is negative, each is not mislaid for these companies. All 5 stocks are still portion of nan Straits Times Index. The 2 REITs, Mapletree Logistics Trust and Mapletree Pan Asia Commercial Trust, are besides portion of REIT indices specified arsenic nan iEdge S-REIT Index.

City Development is besides a personnel of indices specified arsenic nan World and Asia Dow Jones Sustainability Index. It is besides portion of nan FTSE4Good Index and included successful different indices specified arsenic nan Bloomberg Gender Equality Index and nan S&P Global Sustainability Yearbook.

Seatrium has conscionable joined nan Straits Times Index little than a twelvemonth agone and investors could return comfortableness of Seatrium’s introduction then.

Jardine C&C, overmuch for illustration nan different Jardine stocks person recovered themselves being removed from indices owed to factors for illustration their debased trading measurement arsenic a consequence of their debased liquidity, aliases for different reasons related to its stock building and secondary marketplace listing status. However, Jardine C&C remains portion of nan Straits Times Index for now, arsenic its superior and sole listing position is successful Singapore.

As agelong arsenic these stocks activity connected improving their fundamentals, nan stock value should people bespeak their performance.

A lawsuit successful constituent is by ComfortDelgro (CDG) (SGX:C52). CDG was removed from nan Straits Times Index successful September 2022. The stock value fell from $1.38 erstwhile nan removal was announced to astir $1.28 wrong a month. It subsequently fell to arsenic debased arsenic $1.01. It is now trading astatine $1.41, arsenic nan bottommost statement and dividends improved, somewhat higher than erstwhile nan removal was announced, providing for a return connected superior arsenic good arsenic an wide affirmative full return that hit nan MSCI Singapore successful some 2022 and 2023.

Could these stocks person done more?

Yes and No.
Yes, because fundamentally, if these stocks were superstars and were capable to turn their bottommost line, a higher stock value and marketplace capitalisation would people follow. This would support them distant from nan bottommost of nan battalion and support them successful nan various indices.

No, because nan wide capacity of nan Straits Times Index has been lacklustre and does not person world aliases moreover location significance. There person been caller media articles highlighting nan disparity betwixt nan occurrence of Singapore arsenic a financial centre and its banal marketplace performance, prompting discussions and efforts to revitalise nan banal market. If nan banal marketplace tin beryllium revitalized and drawback a bigger stock of nan location and world pie, past nan stocks successful nan Singapore indices would each beryllium earthy beneficiaries.

Closing statements

The removal of these 5 ample stocks leaves MSCI Singapore pinch a specified 16 stocks arsenic opposed to 21 antecedently and 30 stocks successful nan Straits Times Index.

As nan MSCI Singapore Index attracts overseas investors and organization funds, location is simply a anticipation that nan wide allocation to nan Singapore marketplace by these players whitethorn driblet too. Hence, location whitethorn not beryllium immoderate clear beneficiaries from reallocating nan weightage of these 5 stocks to nan different 16 stocks.

All is not mislaid for these stocks arsenic they are still portion of different indices and tin go charismatic should they beryllium capable to execute good fundamentally.

A larger macro rumor remains: whether nan Singapore banal marketplace tin beryllium revitalised and enactment arsenic a rising tide that lifts each boats.

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