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Published on September 6, 2007

A memorandum of understanding signed yesterday will see the FTSE Group, a global index provider, develop and manage at least four new series of large-, mid-, mid-small- and small-cap indexes for the Thai bourse.

Such a cooperative scheme, Thailand's first, will up the ante of Thai tradable indexes through strict international standardisation, said SET president Patareeya Benjapholchai.

With the new international standard, the FTSE SET indexes' clear and transparent structure serves as the basis for trading and benchmarking of financial products, such as exchange-traded funds, derivatives and other mutual fund products, said FTSE Group deputy chief executive Donald Keith.

Of the total 492 SET stocks, 325 will be screened using FTSE's own criteria. While the FTSE's selection criteria, like those for the SET indexes, are based on the volume of market capitalisation, free-float weighting and liquidity screening are equally important.

To be eligible for inclusion in the FTSE SET Index Series, at least 15 per cent of a company's shares must be listed. The stock must also have a liquidity ratio of more than 0.05 per cent. The series will be reviewed semi-annually each June and December, in order to provide stability and reduce turnover in the selection of index constituents.

Such a calculation method ensures that the indexes will not fluctuate too violently as the result of swings in large market-cap stocks, said Keith. The globally recognised Industry Classification Benchmark system will be adopted and facilitate more accurate cross-border analysis and comparisons, Keith added.

Thirty stocks will be selected for the large market-cap index.

The FTSE Group, a joint venture between the Financial Times newspaper and the London Stock Exchange, has previously set up an Asean-wide index series. In May, it partnered with Citigroup and the Ho Chi Minh Stock Exchange to launch a series of equity indexes, mainly as a benchmark for foreign investors that FTSE Asia-Pacific managing director Paul Hoff says takes into account foreign-ownership restrictions.

Patareeya believes the new FTSE SET indexes will not affect its existing SET 50 and SET 100 indexes, since they serve different purposes.

"It's simply more choices," said Patareeya.

The FTSE-managed indexes will not be traded in real time.

Ki Nan Tsui

 The Nation