What is the FBM KLCI?

I attached an article from the online edition of the STAR this morning (18 June.

According to this article,finance stocks will be biggest beneficiary of new index.

Bumiputra-Commerce Holdings Bhd (BCHB) will emerge as the stock with the largest weightage on the FTSE Bursa Malaysia KLCI (FBM KLCI) index which replaces the current KL Composite Index (KLCI) on July 6. They will be by power stocks and gaming counters.

The top 10 stocks in the FBM KLCI weightings are BCHB, Malayan Banking Bhd, Sime Darby Bhd, Public Bank Bhd, Tenaga Nasional Bhd, IOI Corp Bhd, Genting Bhd, Axiata Group Bhd, MISC Bhd and Resorts World Bhd.

Banks and plantations together would have a combined weighting of 55% in the new index.

The top five sectors, which include power, gaming and telecommunication stocks, will have an index weight of 85%.

It's also sayonara for seven sectors – building materials, construction, hotels, insurance, property, timber and technology will will disappear from the radar screen altogether.

In terms of stocks, the major winners from the increase in weightings are Public Bank Bhd and BCHB.

The report also highlighted other stocks with significant gains will be Sime Darby Bhd, Tenaga Nasional Bhd, Malayan Banking Bhd, IOI Corp Bhd, Genting Bhd, Axiata Group Bhd, AMMB Holdings Bhd, Berjaya Sports Toto Bhd and UMW Holdings Bhd.

The major losers were 15 big-cap stocks that would see a drop in weightings due to their lower free float and liquidity.

“They are still in the new index but due to their smaller weightings, they may face selling pressure,’’ it said.The steepest fall in weightings would be RHB Capital Bhd, Malaysia Airlines, Petronas Dagangan Bhd and Petronas Gas Bhd.

Also downgraded were MISC Bhd, DiGi.com Bhd, PLUS Expressways Bhd, Hong Leong Bank Bhd, Astro All Asia Networks Plc and MMC Corp Bhd.

The two largest construction firms on the stock exchange, IJM Corp Bhd and Gamuda Bhd, failed to make the cut into the new benchmark index.

Impact wise, Bursa indicated the direct impact on indexed funds will be minimal at below RM200mil.

The report was of the view that concentration in the top-10 stocks in the FBM KLCI has been intensified.

“Under the KLCI, the top-10 stocks have a combined weighting of 51% whereas under the FBM KLCI, their weighting is 71%,’’ it said.

With the FBM KLCI,we will once again be in uncharted waters.

So do keep your eyes keenly glued to the 10 counters of the FBM KLCI if you are looking for good buys.