SEATRIUM : S51 0% may not make it into the Straits Times Index (STI), while Keppel DC Reit : AJBU 0% remains on thin ice and risks exclusion, according to DBS Group Research. 

Seatrium meets the eligibility criterion for inclusion in the index based on its market capitalisation, said DBS on Friday (May 26). 

And yet, Seatrium’s replacement of the real estate investment trust (Reit) in the index at the next review in June is unlikely, as Keppel DC Reit has yet to meet the exclusion criterion, the research house said. 

DBS noted that the last time there was a change in the STI’s composition – when Emperador replaced ComfortDelGro in the index in September 2022 – one stock met the inclusion rule while the other met the exclusion rule.

The STI tracks the performance of the 30 largest and most liquid companies listed on the Singapore Exchange. 

Companies gain entry to the index – which is reviewed every quarter – if they rank 20th or higher among eligible securities by full market capitalisation. Companies are removed from the list if they rank 41st or lower.

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DBS’ calculations showed Seatrium fell within the top 20 counters on the index based on its S$8.5 billion market capitalisation. Keppel DC Reit is in 35th position, which does not meet the 41-or-below criterion for it to be booted from the index.

Nevertheless, the research house said Keppel DC Reit would risk being excluded from the index if its market capitalisation falls further. In its view, the data centre Reit is “relatively unattractive” due to its low forward yield of under 5 per cent.

“Ongoing narratives of reopening or improving earnings should support the fundamentals and market cap for second or third-lowest ranking STI constituents Sats and DFI Retail,” added DBS.

When a company makes it into the index, passive index trackers buy the counter; conversely, an exclusion leads to these trackers selling its securities.

Keppel DC Reit ended S$0.05 or 2.5 per cent higher at S$2.09 on Friday, while Seatrium closed flat at S$0.125.