Healthcare Is Out, Beer Is In

BeerAfter a brief stay in the top flight – six months to be precise – IHH Healthcare (SGX: Q0F) has been shuffled off the Singapore benchmark index. Its place in the Straits Times Index (SGX: ^STI) will be taken by Thai Beverage (SGX: Y92) after the market closes on 15 March 2013.

Elsewhere, Far East Hospitality Trust (SGX: Q5T), Fortunes Real Estate Investment Trust (SGX: F25) and United Engineers (SGX: U04) will be joining the mid cap index.

Every six months, Singapore Press Holdings, Singapore Exchange and the FTSE Group announce changes to the various FTSE Straits Times indices. This is done so that those listings reflect and represent Singapore’s biggest quoted companies. The latest reshuffle took place on 7 March but the changes would take place for another week.

It is worth bearing in mind that the various changes to the make-up of the indices are done to ensure that those index numbers remain an accurate reflection of market activity. They make very little difference to the actual business performance of the companies.

Just think about it. You are unlikely to drink more Chang beer just because the brewer is now a member of the elite Straits Times Index. Similarly, you are unlikely to go to see a doctor any less than you need simply because IHH is no longer in the top flight.

Then again, some investors might be worried that the share price of a company might fall when it is no longer included in one of the major indices. This might be based on concerns that fund managers may have to adjust their portfolios following changes to the various index constituents.

However, there is little evidence to support this theory. In fact, the cost of dealing may well outweigh any benefits from trying to pre-empt a share price movement before the changes take place.

So it’s probably best not to even try. Instead spend some time deciding whether you believe the shares in the company are undervalued or overvalued, and make your investing decisions accordingly.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.