- As quoted from Kontan, IDX is considering to change the index weight calculations from total market cap basis to free-float market cap basis, which would be done gradually with first changes as early as February 2019. LQ45 Index rebalancing is done in Feb and Aug each year.
- Float-adjusted capitalization is a widely used methodology and is adopted by world’s renowned indexes like MSCI and FTSE. Adrian believes float-adjusted method provides a more accurate market picture as it better reflects the stock’s liquidity as it captures just the actively traded stocks. This would be a better and more fair method, as stocks with low-free-float would have lower index weights; i.e. reducing the disruptions from strategic listings, passive funds chasing big-cap stocks with poor liquidity given the small free-floats.
- While the plan still lacks in details and timing, Adrian did initial screenings on the potential weight changes based on the following assumptions: the spread of today’s index weights versus the potential weights assuming that they’re entirely based on today’s free-floated shares.
- The biggest movers (more than 1% weight changes – based on LQ45 constituents):
– Negatives: HMSP, UNVR, TPIA, ICBP and GGRM
+ Positives: BBCA, TLKM, ASII, BBRI, BMRI