The Philippine Stock Exchange (PSE) has revised its index management policy, aiming to align its benchmark indices with global standards and cater to evolving market needs. The changes, which take effect in February 2027, introduce new liquidity tests, a market capitalization screen, and revised public float rules for companies seeking inclusion in the PSE indices.
The revised framework updates the Exchange's policy governing the PSE Index Series, which was last revised in April 2011. The new policy changes how companies qualify for inclusion in the PSE index (PSEi), PSE MidCap Index, PSE Dividend Yield Index, and the exchange's six sector indices.
Under the new policy, only companies within the top 98% of the cumulative total market capitalization of eligible securities may qualify for inclusion in the PSEi, PSE MidCap Index, PSE Dividend Yield Index, and sector indices. The PSE has also overhauled its liquidity screening process by replacing its previous criterion with two new measures: the Median Trading Activity Ratio (MTAR) and the Monthly Average Daily Value Turnover (MADV).
Companies seeking inclusion in the PSEi, PSE MidCap Index, and PSE Dividend Yield Index must have an MTAR of at least 15%, while existing index constituents must maintain an MTAR of at least 10%. They must also rank among the top 25% in monthly average daily value traded for at least nine of the 12 months under review. For sector indices, companies must have an MTAR of at least 7% and rank among the top 50% in monthly average daily value traded for at least eight of the 12 months under review.
The revised policy also introduces an exception to the minimum public float requirement. While listed companies are generally required to maintain a public float of at least 20% to qualify for index membership, companies with a market capitalization of at least P250 billion may qualify with a minimum public float of at least 15% of outstanding shares, provided they satisfy the other eligibility requirements.
The revision aligns the Exchange's public float requirement for index inclusion with the Securities and Exchange Commission's (SEC) tiered minimum public ownership framework for initial public offerings. According to research firm BDO Securities Corp., the revised methodology may result in changes to the composition of the benchmark PSEi, with Aboitiz Power Corp. and Synergy Grid & Development Phils., Inc. likely inclusions, and China Banking Corp. and DigiPlus Interactive Corp. likely deletions.
For final selection, companies that pass the applicable eligibility requirements are ranked by full market capitalization. The 30 largest companies qualify for the PSEi, while the 20 largest companies outside the PSEi qualify for the PSE MidCap Index. Companies eligible for the PSE Dividend Yield Index are ranked according to their three-year average dividend yield, with the top 20 selected.
