The Philippine Stock Exchange Composite Index, or PSEi, is an index that tracks the performance of the 30 biggest and most actively traded stocks listed in the Philippine Stock Exchange (PSE).
What is the PSEi?
The PSEi serves as the benchmark for the Philippine stock market and an indicator of economic trends in the country.
The index’s movement is particularly good for identifying investors’ expectation for the whole economy. If sentiment is negative, you’ll see a drop in the index. The reverse happens if the sentiment is positive.
Like individual stocks, the PSEi has resistance and support levels. These can help investors see the general market trend and decide whether to buy or sell shares of the individual stocks they are monitoring. Of course, the index’s resistance and support may change over time.
How are companies chosen for the PSEi?
This index is made up of the common stocks of 30 listed companies, which were chosen for their ability to represent the general movement of the stock market.
There are 3 requirements a company must meet to be included in the PSEi:
- Its free float level must be at least 15%.* This is the number of shares available to the public for trading.
- It must rank among the top 25% in terms of median daily trading value in at least 9 out of the 12-month period in review.
- Companies that meet the first 2 criteria will be ranked. The top 30 companies will be included in the PSEi.
*NOTE: Starting December 2022, the PSE has raised the free float level requirement to 20%.
The PSEi is reviewed on a semi-annual basis, and sometimes companies are removed from and added to the index.
What are the PSE’s other indices?
Aside from the PSEi, the PSE has other indices that represent different aspects of the stock market.
These include the sectoral indices, which group companies according to their industry. They are:
- Financials Index
- Industrial Index
- Holding Firms Index
- Property Index
- Services Index
- Mining & Oil Index
The sectoral indices show the movement of stocks and the sentiments of investors in these specific industries.
The PSE also has the All Shares Index, which includes all the common stocks of all listed companies. It is considered a broader barometer than, but complementary to, the PSEi.
In 2022, the PSE launched 2 new indices. The PSE MidCap Index focuses on the performance of mid-sized companies while the Dividend Yield Index includes 20 companies that give high-yielding dividends.
After learning how the PSEi works, you may be wondering how to invest. There are different ways to invest in stocks and you may find a suitable option even if you’re a beginner.
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