In a circular released after-market on Sept. 28, the Philippine Stock Exchange (PSE) announced the removal of Union Bank of the Philippines (UBP) from the PSE index (PSEi), Financials index (PFINC), and the newly-created PSE MidCap and Dividend Yield indices. <\/p>\n\n\n\n
According to the PSE, the move came after a certain number of shares was reclassified from public to non-public, causing UBP\u2019s public float to fall below the 20% requirement for index inclusion. While the number of shares and its ownership was not disclosed in the circular, we can assume that the reclassification involved the 18.74% stake held by Social Security System (SSS). If that is the case, UBP\u2019s public float would have fallen from 35.63% to 16.89%.<\/p>\n\n\n\n
UBP has previously been reporting the SSS stake as public since shares held by pension funds were classified as such. However, amendments made to the minimum public ownership (MPO) rule on August 25 stated that:<\/p>\n\n\n\n
\u2026the following are considered public shares:<\/em><\/p>\n\n\n\n \u2026 Since SSS holds two board seats in UBP, occupied by SSS President CEO Rolando Macasaet and SSS Commissioner Robert Joseph M. De Claro, the state pension fund\u2019s stake has been reclassified as non-public. We assume that this was brought about when GSIS wrote to the Exchange that its newly-acquired 11.98% stake in MPI should be considered non-public, as the PSE circular stated that the reclassification was \u201cconsistent with the treatment of such shares that are similar in nature\u201d.<\/p>\n\n\n\n Nickel Asia Corp. (NIKL) will replace UBP on the PSE index effective upon market open of October 4, 2023 (Wednesday). Lucio Co\u2019s liquor distribution company, The Keepers Holdings, Inc. (KEEPR), will replace UBP on the MidCap index while Universal Robina Corp. (URC) will replace it on the Dividend Yield index. There will be no replacement on the Financials sectoral index.<\/p>\n\n\n\n Removal from both the benchmark and sectoral indices would further deprive UBP of liquidity. As it stands, it already has the lowest 30-day average value turnover out of the 30 PSEi companies, and we expect this to deteriorate further after the rebalancing exercise. <\/p>\n\n\n\n Inclusion in the index would be a boon to NIKL, and the inflow of funds could be the catalyst to break it out of its slump. We currently have a BUY rating on NIKL based on consensus Target Price of P7.60. <\/p>\n\n\n\n UBP\u2019s exit could also drive the market higher, as NIKL\u2019s float-weighted market capitalization is around 1\/3 of UBP\u2019s, which would result in an upweight for all the other index constituents. The biggest gainers would likely be the index heavyweights: SM, BDO, SMPH, BPI, and ICT.<\/p>\n\n\n\n
c. Common shares held by Funds, including government-run funds such as the Social Security System (SSS) and the Government Service Insurance System (GSIS), regardless of the amount of shareholdings, unless the Fund has a Board seat in the company;”<\/em><\/p>\n\n\n\nUBP out of PSEi, NIKL in<\/h3>\n\n\n\n
What does it mean for UBP and NIKL?<\/h3>\n\n\n\n