HSC Update - HSC Exclusion: Toward a More Representative JCI
Improving Benchmark Representativeness IDX plans to exclude about 80 High Shareholding Concentration (HSC) stocks, c.18% of the JCI by its estimate, from the index calculation from early November, according to IDX, with the stated aim of giving a fairer picture of market movements; the exact date and methodology have yet to be published. We view this as a constructive refinement of JCI methodology, as large market capitalisation does not always mean a large pool of shares available to independent investors. The more important change is in what drives the index: on a simple full market cap share of the remaining universe, the four largest banks would rise from 16.1% to c.22.4%, although actual weights will depend on IDX's final methodology.
Improving Benchmark Representativeness
IDX plans to exclude about 80 High Shareholding Concentration (HSC) stocks, c.18% of the JCI by its estimate, from the index calculation from early November, according to IDX, with the stated aim of giving a fairer picture of market movements; the exact date and methodology have yet to be published. We view this as a constructive refinement of JCI methodology, as large market capitalisation does not always mean a large pool of shares available to independent investors. The more important change is in what drives the index: on a simple full-market-cap share of the remaining universe, the four largest banks would rise from 16.1% to c.22.4%, although actual weights will depend on IDX's final methodology.
Ownership Structure and Broader Reforms
On KSEI data, mutual funds, pension funds and insurers hold 2.8% of KSEI-held HSC value, against 18.8% for non-HSC stocks, while corporate holders account for 61.3%. Direct fund ownership is relatively limited, and HSC stocks already left IDX30, LQ45 and IDX80 in May, although actual selling pressure will depend on investor composition, benchmark exposure and implementation. We view HSC exclusion as a constructive addition to ongoing reforms; its contribution to investor confidence will be reinforced by progress in ownership transparency, effective free float and enforcement, the areas highlighted in MSCI's 15 October consultation.
Investment Conclusion: Ownership Quality as a Selection Screen
We stay selective and fundamentals-driven, favouring companies with dispersed ownership and verifiable free float; for HSC stocks, a credible free-float improvement is the stock-specific catalyst. Our preferred names, namely BRIS, ANTM, WINS and BBCA, and MIDI, MAPI and CMRY in consumer, are not on the HSC list used in this report.
