Global index provider MSCI Inc. (MSCI) is scheduled to rebalance this month its benchmark indicators for the Philippine market, called the MSCI Standard Philippine Index.
MSCI reviews its indexes regularly to add new stocks, remove underperforming ones, or change company weights to capture and maintain the following vital aspects of the market: accurate market representation, capture real-time market shifts, mitigate risk, ensure high trading liquidity, and align with global index standards.
In the case of the Philippines, MSCI’s schedule of evaluating stocks for the purpose of rebalancing and index reviews are fixed in the following annual pattern: a) quarterly index review in February; b) semi-annual index review in May; c) quarterly index review in August; d) semi-annual index review in November.
As stated, MSCI will announce the final results of its quarterly index review on August 12, and respectively designated August 31 and September 1 as the implementation and effective date.
The implementation date is the final deadline when those changes are actually executed in the index calculations. This is important because when MSCI adds, removes, or reweights a stock, passive fund managers have no choice but to purchase newly added stocks and dump deleted stocks. They must align with the new weights to avoid tracking error. This mechanical execution happens entirely by the close of the implementation date. Conversely, the effective date is the immediately preceding trading day.
