FTSE Bursa Malaysia KLCI

BURSA MALAYSIA’S STRATEGIC OBJECTIVES

Bursa Malaysia is committed towards extending the Malaysian capital market’s global reach by offering competitive services and infrastructure through adoption of internationally accepted standards which are globally relevant.

As part of Bursa Malaysia’s strategic initiative, the Kuala Lumpur Composite Index (KLCI) was enhanced to ensure that it remains robust in measuring the national economy with growing linkage to the global economy. Bursa Malaysia together with FTSE, its index partner, have integrated the KLCI with internationally accepted index calculation methodology to provide a more investable, tradable and transparently managed index.

The enhanced KLCI, whilst remaining representative of the Malaysian stock market, provides a platform for a wider range of investable and appealing opportunities.

The KLCI is now known as the FTSE Bursa Malaysia KLCI and the enhancements were implemented on Monday, 6 July 2009.

STRENGTHS OF THE FTSE BURSA MALAYSIA KLCI

1. The KLCI is known as FTSE Bursa Malaysia KLCI to provide global relevance, recognition and reach.
2. A market barometer made up of primary market movers will more aptly define market activities while remaining representative of the Malaysian stock market.
   
3. The FTSE Bursa Malaysia index calculation methodology emphasises free float and liquidity screens for a clearer representation of the market.
   
4. A smaller basket of 30 stocks makes it easier to manage and more appealing for the creation of Index Linked products to promote market liquidity.
   
5. Increasing the frequency of index calculation from every 60 seconds to every 15 seconds tracks the market pulse closely and more efficiently.
   
6. The continuity of the KLCI index value preserves the historical movements of the Malaysian stock market.

SELECTION OF FTSE BURSA MALAYSIA KLCI CONSTITUENTS

The FTSE Bursa Malaysia KLCI comprises the largest 30 companies listed on the Main Board by full market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Ground Rules.

The two main eligibility requirements stated in the FTSE Bursa Malaysia Ground Rules are the free float and liquidity requirements as indicated below :-

• Free Float

Each company is required to have a minimum free float of 15%. The free float excludes restricted shareholding like cross holdings, significant long term holdings by founders, their families and/or directors, restricted employee share schemes, government holdings and portfolio investments subject to a lock in clause, for the duration of that clause. A free float factor is applied to the market capitalisation of each company in accordance with the banding specified in the FTSE Bursa Malaysia Ground Rules. The factor is used to determine the attribution of the company’s market activities in the index.

• Liquidity

A liquidity screen is applied to ensure the company’s stocks are liquid enough to be traded. Companies must ensure that at least 10% of their free float adjusted shares in issue is traded in the 12 months prior to an annual index review in December.

CALCULATION AND REVIEW OF THE FTSE BURSA MALAYSIA KLCI

FTSE uses the real time and closing prices sourced from Bursa Malaysia to calculate the FTSE Bursa Malaysia KLCI. Calculation is based on a value weighted formula and adjusted by a free float factor. The FTSE Bursa Malaysia KLCI values are calculated and disseminated on a real time basis every 15 seconds.

The FTSE Bursa Malaysia KLCI is reviewed by the FTSE Bursa Malaysia Index Advisory Committee on a semi-annual basis in June and December. Full market capitalisation data as at the last trading day of May and November is used for the review. Any constituent changes will be implemented after close of business on the 3rd Friday in June and December.

Please refer to the FTSE Bursa Malaysia Ground Rules for further information about the eligibility, calculation and review criteria.

VARIATION TO THE KUALA LUMPUR COMPOSITE INDEX FUTURES (FKLI) AND KUALA LUMPUR COMPOSITE INDEX OPTIONS (OKLI) CONTRACT SPECIFICATION

Arising from the transition of KLCI to FTSE Bursa Malaysia KLCI on the Implementation Date, kindly take notice that the contract specifications for FKLI and OKLI contracts (which are currently stipulated in Schedule 6 and 7 respectively of the Rules of Bursa Malaysia Derivatives Berhad (“Rules of Bursa Derivatives”)) that are created in the trading months as stated in the table below will be varied with effect from 1 February 2009 in the manner set out in paragraphs (i) and (ii) below

1. the ‘UNDERLYING STOCK INDEX’ as stipulated in Schedule 6 for FKLI and as stipulated in Schedule 7 for OKLI is changed to read as follows.
   
   ‘Kuala Lumpur Composite Index (from 1 February 2009 until 3 July 2009)
   FTSE Bursa Malaysia KLCI (from 6 July 2009 onwards)’
   
   
2. to add ‘ATTRIBUTION CLAUSE’ as follows.
   
   ‘The FTSE Bursa Malaysia KLCI Index is calculated by FTSE International Limited (“FTSE”).
   
   All intellectual property rights in the FTSE BURSA MALAYSIA KLCI vests in FTSE and Bursa Malaysia Berhad (“BURSA MALAYSIA”). “FTSE®”, “FT-SE®” and “Footsie®” are trade marks of the London Stock Exchange Plc (the "LSE") and The Financial Times Limited ("FT") and are used by FTSE under licence. “BURSA MALAYSIA”, “Kuala Lumpur Composite Index” and “KLCI” are trade marks of BURSA MALAYSIA.
   
   FTSE nor BURSA MALAYSIA nor LSE nor FT makes any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Bursa Malaysia KLCI and/or the figure at which the FTSE Bursa Malaysia KLCI stands at any particular time on any particular day or otherwise.'

This Attribution Clause is added for the use of FTSE Bursa Malaysia KLCI as the underlying index for FKLI and OKLI by FTSE and its partners.

KLCI MILESTONES

The barometer of the Malaysian stock market was the Industrial Index which was launched on 2 January 1970. Its constituents comprised of 30 industrial stocks and the base year was 1970. By 1985, the Industrial Index was considered to be no longer reflective of the stock market. The Exchange and industry representatives agreed that the stock market needed an index that was reflective of the market performance, sensitive to investors’ expectations, indicative of Government policy changes and responsive to structural changes in the economy. This index is what we now know as the KLSE Composite Index or KLCI.