Specialists tracking environmental, social, and governance (ESG) benchmarks in Southeast Asian equity markets are reading the latest rebalancing of the FTSE4Good Bursa Malaysia (F4GBM) Index as a clear signal of sustained corporate adoption of sustainability criteria. Bursa Malaysia Bhd. announced that the index, which debuted in December 2014 with 24 constituents, now includes 98 companies overall following 21 fresh additions and 10 deletions during the review period of December 2022.
Technical Analysis of Index Composition and Growth
Analysts examining the technical composition of the F4GBM Index note that the current 98 constituents represent a continuation of the index’s year-over-year growth pattern since its launch in 2014. The index is designed to measure the performance of publicly traded businesses that exhibit sound environmental, social, and governance principles. The inclusion universe for the F4GBM Index is drawn from the FTSE Bursa Malaysia EMAS Index, which encompasses public listed companies (PLCs) from small, medium, and large market capitalization groups. The 21 additions and 10 deletions reflect the index’s periodic rebalancing, which occurs in June and December of each year, aligning with global benchmark review schedules.
Shariah-Compliant Index Also Expands
In a parallel development, the FTSE4Good Bursa Malaysia Shariah (F4GBMS) Index will have 79 constituents following the latest review. This index, which debuted in July 2021 with 54 constituents, is intended to track F4GBM constituents that are shariah-compliant in accordance with the screening technique used by the Shariah Advisory Council. The F4GBMS Index recorded 21 new additions and seven cancellations during the same December 2022 review period. Both indices are rebalanced simultaneously, with all constituent changes becoming effective on December 19 at the start of business.
Market Implications and Forward Outlook
Market observers are now focusing on how the expanded index composition may influence capital flows into Malaysian equities. The inclusion of 21 new companies broadens the ESG-labeled investment universe, potentially attracting institutional mandates that require ESG benchmarks. For the F4GBMS Index, the increase to 79 constituents from its initial 54 in July 2021 demonstrates growing participation among shariah-compliant firms in the ESG framework. The next scheduled review in June 2023 will provide the next opportunity for market participants to assess whether the trend of year-over-year growth continues, and which sectors or market capitalization tiers are driving additions or deletions. Investors and analysts will be watching for any shifts in the composition of both indices that could signal changing corporate priorities in environmental, social, and governance practices among Malaysian publicly listed companies.
