The 30 stocks that make up the benchmark Straits Times Index (STI) are set to change for the first time in more than two years following new liquidity rules.
The semi-annual review has decided that property giant UOL Group, shipbuilder Yangzijiang Shipbuilding Holdings and engineering firm Sats will join the index from Sept 21.
The changes were announced by Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Russell yesterday.
The new entrants will replace two units under the Jardine conglomerate - Jardine Matheson Holdings and Jardine Strategic Holdings - and Olam International.
The changes were prompted by new rules that require shares on the STI to have a reasonably high level of turnover or liquidity.
These component stocks now must trade at least 0.1 per cent of their issued shares, up from 0.05 per cent, based on their median daily trade for 10 of the 12 months before a review date, which could be in March or September.
CMC Markets analyst Nicholas Teo told The Straits Times that the two Jardine firms were likely dropped from the index because they were "unable to meet the liquidity hurdle".
"For the longest time, people have been asking for something to be done about the Jardine companies," he said, pointing to their thin trading volumes. "If they're so tightly held and poorly traded, then they don't make a good reflection of the market."
Mr Teo noted that Olam will see less trading volume now that Temasek Holdings and Mitsubishi Corporation hold substantial stakes. "Traders will react to the news with a selldown on Jardine and Olam and some pullback on Olam, though probably less because of its recent deal with Mitsubishi," he said. "Those three stocks to be included, on the other hand, will be bid up."
Remisier Alvin Yong said the change will comes as a "positive move for most investors" as the STI, which has been left untouched for a long while, will represent a more diverse market.
The STI reserve list of the five highest ranking non-constituents of the STI by market capitalisation comprises CapitaLand Commercial Trust, Singapore Post, Suntec Real Estate Investment Trust (Reit), Keppel Reit and M1.
Companies on this list will replace any constituents that become ineligible as a result of corporate actions before the Dec 3 review.
The last change to the STI - in April 2013 - saw Hutchison Port Holdings Trust replace Fraser and Neave.