Union Bank of the Philippines (UBP) will be removed from the Philippine Stock Exchange Index (PSEi) and other subindices on October 4, 2023. UBP will be replaced by Nickel Asia Corp. (NIKL) in the PSEi. <\/p>\n\n\n\n
This decision by the PSE came as a result of new rules regarding shares held by state pension funds. The change is due to recent revisions in the classification of shares held by government funds, which significantly invests in the Philippine stock market. Under the new rules, shares held by pension funds will be reclassified as non-public unless the fund has a board seat in the company. <\/p>\n\n\n\n
This reclassification reduced UBP’s public float to below the 20% minimum required for PSEi inclusion. Aside from being removed from the PSEi, UBP will also be excluded from the PSE’s Midcap and Dividend subindices. In these sub-indices, Keepers Holdings Inc. (KEEPR) will take UBP’s place within the Midcap category, while Universal Robina Corporation (URC) will replace it in the Dividend subindex.<\/p>\n\n\n\n
Our View: <\/strong>UBP’s stock price may encounter short-term volatility and experience a transitory downward trend following its removal from key indices. Index funds that closely track these benchmarks are likely to swiftly divest, potentially leading to reduced demand from both institutional and passive investors. <\/p>\n\n\n\n In contrast, NIKL, KEEPR, and URC could witness brief surges in their share prices due to sudden demand from passive funds that mirror the indices. Much like the recent index revisions, any impact on the stock prices of these companies is expected to be of limited duration. <\/p>\n\n\n\n NIKL, in particular, is poised to be the primary beneficiary as it is entering the main index. However, it’s important to take into consideration that NIKL is facing challenges within the current macroeconomic environment. Elevated global interest rates and the economic slowdown in China have pushed Nickel futures to nearly a two-year low, dipping below the $19,000 per tonne threshold. NIKL’s first-half net income has declined by 55%, dropping from P3.8 billion to P1.7 billion, primarily due to reduced metal prices impacting its revenue. <\/p>\n\n\n\n Nonetheless, there is a possibility that NIKL may break out from its current Darvas Box pattern and test a significant resistance level at P5.84. The index inclusion presents traders with a potential opportunity to capitalize on profits arising from this development.<\/p>\n\n\n\n