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Here’s the rebalanced composition of the MSCI Philippines index as of August 2013, versus its composition during the previous quarter.

The changes were announced August 15 and took effect on September 2 but immediately after the announcement, portfolio managers started realigning and rebalancing their portfolios. This caused massive sell-offs last month, particularly affecting the stock of SM Investments Corp. (SM) which suffered a huge drop of 7.73% on the day of the MSCI rebalancing announcement.

(See related article: PSEi vs. Philippines MSCI Index Performance)

Composition of MSCI Philippines Index, August 2013 vs. May 2013

Company Stock Code Index Weight (%), as of August 2013 Index Weight (%), as of May 2013
SM Investments Corp. SM 12.38% 15.87%
Ayala Land Inc. ALI 9.87% 10.14%
PLDT TEL 8.42% 7.99%
Banco de Oro BDO 7.18% 7.10%
Universal Robina Corp URC 7.08% 6.64%
SM Prime Holdings SMPH 6.67% 6.55%
Ayala Corp. AC 6.57% 6.58%
Aboitiz Equity Ventures AEV 6.02% 5.95%
Int'l Container Terminal Services ICT 5.00% 4.36%
Jollibee Foods Corp. JFC 4.56% < 4.10%
Bank of the Philippine Islands BPI <4.56% 4.10%
+ 8 other stocks   26.25% 24.71%
Total   100.00% 100.00%

In the rebalanced MSCI Philippines Index, the weights of SM and several companies of the Ayala conglomerate were reduced. Ayala Land Inc. (ALI) and Ayala Corp. (AC) were retained in the Top 10 Holdings list but their index weights were reduced to 9.87% and 6.57%, respectively.

Stocks, Mutual Funds, Forex, Finance Philippines

The weights of other stocks in the index, including PLDT (TEL), Banco de Oro (BDO), Universal Robina Corp (URC), SM Prime Holdings (SMPH), Aboitiz Equity Ventures (AEV) and International Container Terminal Services (ICT) were slightly increased.

Jollibee Foods Corp. (JFC) entered the Top 10 stocks, dethroning Bank of the Philippine Islands (BPI) that used to occupy the 10th spot as of May 2013.

The MSCI Philippines Index is reviewed and rebalanced, if needed, four times a year — in February, May, August and November.

Performance of the MSCI Philippines Index

Below is a summary of the gross returns of two MSCI indices — the MSCI Philippines Index and the MSCI Emerging Index as of the end of August 31, 2013.

MSCI Philippines and Emerging Market Indices — YTD, 1-Year, 3-Year, 5-Year Returns

Index YTD Return % 1-Yr Return % 3-Yr Return % 5-Yr Return %
MSCI Philippines Index -2.12% 14.43% 17.76% 17.00%
MSCI Emerging Market Index -10.19% 0.54% 1.09% 1.88%

Compare this with the year-to-date, 1-year- 3-year and 5-year returns of Mutual Funds in the Philippines and Unit Investment Trust Funds (UITF) as of August 2013. The MSCI Philippine index performance seems to be at par with the performance of mutual funds and UITFs.

We also made a comparative analysis of the annual performance of the 30-company Philippine Stock Exchange index (PSEi) with the annual returns of the MSCI Philippines Index. Here’s a graph comparing the 2006-2012 PSEi and MSCI Philippine Index returns.

Annual Returns of PSEi vs. MSCI Philippines Index, 2006-2012

MSCI Philippines Index; MSCI Emerging Index; PSE index

The graph shows that, in most cases, the MSCI Index is able to outperform the PSEi. Such benchmark-beating performance tend to explain why thousands of clients around the world follow the MSCI indices and their proposed stock composition.

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