MSCI drops S-E Asian heavyweights Sembcorp, GoTo and Ayala Land from global benchmarks

[JAKARTA] South-east Asia came out empty-handed in MSCI’s latest quarterly review, with no additions to its Global Standard Indexes. Additionally, four of the region’s better-known stocks got the boot from the benchmarks, with three of them relegated to its small-cap indexes.

The deletions include Singapore’s Sembcorp Industries, the Philippines’ Ayala Land and Indonesia’s GoTo Gojek Tokopedia and Charoen Pokphand Indonesia.

Malaysia and Thailand recorded no constituent changes in the Global Standard Indexes in the latest review.

The changes will take effect after the close of trading on Aug 31, MSCI said on Thursday (Aug 13), after the global index provider reshuffled constituents across Asia-Pacific markets.

As at Thursday, Sembcorp Industries, which will be removed from the MSCI Singapore Index, has a market capitalisation of about US$7.8 billion.

Ayala Land, set to leave the MSCI Philippines Index, is valued at roughly US$3.6 billion.

GoTo, Indonesia’s largest technology company by users, will be removed from the MSCI Indonesia Index amid concerns over the stock’s liquidity. The company’s market capitalisation has fallen to about US$3 billion, from a peak of roughly US$29 billion in 2022 after its initial public offering.

Indonesia remains classified as an Emerging Market by MSCI, with the latest announcement offering no indication of a potential downgrade to Frontier Market status, a risk that emerged earlier this year amid concerns over market accessibility and investability.

Henry Wibowo, co-founder of Alphagate Capital and former chief Indonesia strategist at JPMorgan, said that the review was broadly in line with market expectations. “The next major catalyst will be MSCI’s November review, when investors are likely to focus more closely on any potential change to Indonesia’s classification,” he added.

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Three of the four stocks will remain within MSCI’s global index universe, albeit among the small caps. Sembcorp Industries, Ayala Land and Charoen Pokphand Indonesia will be added to their respective MSCI small-cap indexes, while GoTo is not among these additions.

The removals from the Global Standard Indexes come as several other Asian markets added constituents in the same review.

India’s Adani Energy Solutions, worth about US$20.8 billion, was also added. Taiwan secured six additions in the review, India four and China 33.

Taiwan semiconductor memory maker Nanya Technology was the largest addition by full company market capitalisation, at about US$39 billion.

All in all, 45 stocks joined MSCI’s Global Standard Indexes across Asia-Pacific markets, while 55 were removed.

Ricky Ho, chief investment officer and portfolio manager at Four Capital, said that the impact of the latest changes is likely to be most visible at the individual-stock level, as passive funds tracking the benchmarks adjust their holdings.

“For more liquid stocks, such changes are typically reflected through the closing auction,” he noted. “But the impact could be more pronounced for GoTo, whose deletion is linked to liquidity concerns.”

Some of the adjustment may take place before the effective date as active and benchmark-aware investors anticipate the rebalance. “However, passive funds will still need to implement the changes when the new index composition takes effect,” he explained.

The latest review also highlights differing sector composition across Asian equity markets, driven by investors’ focus on artificial intelligence and semiconductor-related opportunities.

Henry from Alphagate Capital said that South-east Asia has less direct exposure to the AI theme than North Asia, contributing to the divergence in market performance and foreign capital flows over the past year.

“While North Asia remains the more direct beneficiary of the AI hardware cycle, South-east Asia – Indonesia and Malaysia in particular – has an opportunity to participate through the infrastructure layer supporting the broader AI ecosystem,” he noted.

The MSCI Singapore Index tracks the performance of Singapore’s large and mid-cap segments. It covers 85 per cent of the free float-adjusted market capitalisation of Singapore stocks.

With the removal of Sembcorp, the top 10 stocks by market cap in the index are DBS, OCBC, UOB, Sea ADR, Singtel, Singapore Exchange, Keppel, ST Engineering, CapitaLand Integrated and Singapore Airlines.