This Is Why The PSEI Is The Most Important Index To Look Out For
What would you answer if someone asked: "what is PSEI?"
If you’ve just started trading on the stock market, you might not know what is PSEI. You might have seen the term on the TV, or in the newspaper. And it holds a lot of significance! After reading this article, you’ll have a better understanding of what it is and how it affects you.
What is PSEI?
It stands for the Philippine Stock Exchange Composite Index (PSEI). There are nearly 240 companies listed in the Philippines Stock Exchange. But the PSEI is made up of only 30 of the biggest companies.
Why is it important?
You might be saying to yourself “Ok, that’s great! But why is this important to me?”
According to Investopedia, an index is basically a sample to represent the wider market. It’s the same way that marketing firms use surveys to gauge the general response of the population based on the replies of a select group.
And many investors use the PSEI to help make investing decisions. When the PSEI is doing well, stocks like mutual funds are expected to do well (for a brief explanation of what mutual funds are, check out our brief guide!). And if it’s doing poorly, this may be a good indicator to sell certain stocks you’ve been holding.
Many investors also use the PSEI as a general measure of the Philippine economy.
Which companies make up the PSEI?
There are 30 companies that make up the PSEI and are divided into six distinct sectors – properties, holding firms, financial, services, industrial and mining and oil.
As of writing (Nov 2018), the 30 companies are:
- Aboitiz Equity Ventures, Inc. (AEV)
- Aboitiz Power Corp. (AP)
- Alliance Global Group, Inc. (AGI)
- Ayala Corporation (AC)
- Ayala Land, Inc. (ALI)
- Bank of The Philippine Islands (BPI)
- BDO Unibank, Inc. (BDO)
- DMCI Holdings, Inc. (DMCI)
- First Gen Corporation (FGEN)
- Globe Telecom, Inc. (GLO)
- GT Capital Holdings, Inc. (GTCAP)
- International Container Terminal Services, Inc. (ICT)
- JG Summit Holdings, Inc. (JGS)
- Jollibee Foods Corporation (JFC)
- LT Group, Inc. (LTG)
- Megaworld Corporation (MEG)
- Manila Electric Company (MER)
- Metro Pacific Investments Corporation (MPI)
- Metropolitan Bank & Trust Company (MBT)
- Petron Corporation (PCOR)
- Philippine Long Distance Telephone Company (TEL)
- Puregold (PGOLD)
- Robinsons Land Corporation (RLC)
- Robinsons Retail Holdings (RRHI)
- San Miguel Corporation (SMC)
- Security Bank (SECB)
- SM Investments Corporation (SM)
- SM Prime Holdings, Inc. (SMPH)
- Semirara Mining And Power Corporation (SCC)
- Universal Robina Corporation (URC)
How do companies make the cut for the top 30 ranking?
To be included in the PSEI, a company must meet three criteria:
1. The company’s free float level must be at least 12%
Basically, the free float level is the percentage of a company’s outstanding shares that aren’t held by shareholders. In this way, this percentage is considered what can be publicly traded.
2. The company must rank in the top 25% for median daily value per month in nine out of twelve months
3. The top 30 ranking is based on full market capitalisation
Full market capitalisation is essentially working out the total value of a company. And the top 30 ranking is determined by the overall worth of each company.
Now you can answer what is PSEI and why it’s important! Share with any friends who were asking about this recently!
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