<News First Take>: YZJ Financial Holdings inclusion in STI puts CDG at risk of removal
- STI inclusion of YZJFH puts ComfortDelGro at risk of removal
- STI constituents to be ranked by market capitalisation on 28 April 2022 with smallest constituent removed by 5 May 2022
- ETFs tracking the STI hold a total of S$33m in CDG vs CDG’s average daily trading volume of S$20m
- Maintain BUY with TP of S$1.95
What’s New
YZJ Financial Holdings (YZJFH) has announced that they will be added to the STI index when it begins trading on 28 April 2022. STI constituents will then be ranked according to full market capitalisation on 28 April 2022 with the smallest constituent removed from the index effective 5 May 2022.
Our View
ComfortDelGro is the smallest constituent on the STI index with a market capitalisation of S$3.3bn. The next smallest company by market capitalisation is Keppel DC REIT with a market capitalisation of S$3.6bn. In essence, unless YZJFH or YZJ Shipbuilding trades below CDG’s market cap on 28 April 2022, CDG will be subject to removal from the STI from 5 May 2022.
What is the likely impact on CDG upon removal? Total holdings of CDG from the two main STI ETFs (SPDR STI ETF and NikkoAM STI ETF) is at c.S$33m. This compares to CDG’s average daily trading volume of c.S$19m. While we can expect some near term pressure on CDG’s share price as the ETFs rebalance, CDG’s liquidity appears ample to absorb the impact.
We currently have a BUY call on CDG with a TP of S$1.95.