Frasers Centrepoint Trust expected to join STI in March review

THE king of heartland malls could earn a place on the Straits Times Index (STI) at the next quarterly review in March.

Analysts said that they expect Frasers Centrepoint Trust (FCT) to be included in the benchmark index in the upcoming review given its high market capitalisation.

The trust has nine retail properties in its portfolio, of which most are suburban malls such as Northpoint City North Wing in Yishun and Nex in Serangoon.

Darren Chan, a senior research analyst at Phillip Securities Research, said that there was “a good possibility” that FCT would be included in the STI.

Chan noted that FCT has a market capitalisation of close to S$4 billion. This is higher than that of DFI Retail Group (DFIRG), which has the lowest market capitalisation on the STI at about S$3.8 billion.

FCT is currently on the STI reserve list. Stocks on the reserve list will replace any STI constituents that become ineligible as a result of corporate actions before the next review.

Similarly, DBS Group Research said in a note on Feb 8 that FCT is in the “top spot” for inclusion in the STI should any of the index’s constituents be removed.

It noted that FCT’s market capitalisation is around S$300 million more than that of CapitaLand Ascott Trust , which has the next highest market capitalisation on the STI reserve list. CapitaLand Ascott has a market capitalisation of S$3.6 billion.

However, analysts were mixed on which STI constituent FCT would replace.

STI constituents are removed from the index if their ranking in terms of full market capitalisation falls to 41st position or lower.

They can also be excluded from the STI if they have low trading liquidity. This means that they do not trade more than 0.08 per cent of their shares in issue, based on their median daily trading volume per month, for at least eight out of the 12 months prior to the review.

DBS Research Group felt that FCT could potentially replace Manila-based spirits company Emperador due to the latter’s low trading liquidity.

“Our analysis shows that Emperador has barely passed the liquidity threshold of eight out of 12 months in 2023,” said the group.

However, Chan felt that Emperador would remain on the STI after the review. He pointed out that there are 10 stocks on the STI with a lower market capitalisation than Emperador, which has a market capitalisation of S$8 billion.

Instead, he was of the view that DFIRG would be excluded given that it has the smallest market capitalisation on the STI.

However, DBS Research Group said that it does not expect DFIRG to be removed from the STI. While it has the lowest market capitalisation among the STI constituents, it still ranks at 35th place, higher than the 41st position for exclusion, noted the group.