FBM KLCI is a capitalisation weighted stock market index composed of the 30 largest companies on the Bursa Malaysia. A capitalisation weighted index is weighted according to these companies total market capitalisation. Market capitalisation is calculated by multiplying the total number of shares by the current price of the company.
The companies with higher market capital carry a higher weighted percentage compared to companies with lower market capitalisation. These companies can significantly impact the overall value of the index.
The number talks. (Data based on 29 May 2019)
- Maybank: 11.05billion shares, RM9.05 per shares
- Nestle: 234.5million shares, RM147.50 per shares
- PBBank: 3.882billion shares, RM23.00 per shares
- HLBank: 2.168billion shares, RM18.58 per shares
- DIGI: 7.775billion shares, RM4.81 per shares
The total market value of each company would be calculated as:
- Maybank = 11.05b x RM9.05 = RM100.0b
- Nestle = 234.5m x RM147.50 = RM34.6b
- PBBank = 3.882b x RM20.00 = RM89.3b
- HLBank = 2.168b x RM18.58 = RM40.3b
- DIGI = 7.775b x RM4.81 = RM37.4b
The entire market value of KLCI equals RM1,039.9billion. Each company weightings as:
- Maybank = RM100.0/RM1,039.9b = 9.62%
- Nestle = RM34.6/RM1,039.9b = 3.33%
- PBBank = RM89.3/RM1,039.9b = 8.59%
- HLBank = RM40.3/RM1,039.9b = 3.87%
- DIGI = RM37.4/RM1,039.9b = 3.60%
Although Nestle has the highest price in the KLCI, the low outstanding of shares represents 3.33% of the total market capital. On the other hand, DIGI represents 3.60% of the total market capital with higher outstanding number of shares and lower market price. Maybank is the most weighted component in the KLCI with 9.62%. Genting weighted 2.36% with similar outstanding of shares compares to PPBank. On 29 May 2019, Tenaga is the major contributor to KLCI 9.1 points gain. Tenaga’s RM70b market capital makes up a 6.7% from the total market capital of KLCI.
Capitalisation Weighted Index provides access to both large and small companies. Large market capital such as Maybank, PBBank, Tenaga, Pchem have higher weigthing and tend to provide higher impact to the gain and drop of KLCI. Conversely, small market capital such as Airport, TopGlov and Ambank provides lower impact.