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MR DIY Group (M) Bhd, well known for its chain of hardware stores selling household products ranging from power tools to bathroom supplies, is at risk of being removed from the FTSE Bursa Malaysia KLCI (FBM KLCI) constituents list.

FBM KLCI is the main benchmark stock market index for Malaysia, representing the performance of the top 30 largest companies by market capitalization on the Bursa Malaysia Main Board.

According to a report by The Star, MR DIY is currently hovering at the 35th spot, closely followed by KPJ Healthcare Bhd just by a difference of three sen.

MBSB Research (formerly MIDF Research), the investment research arm of MBSB Investment Bank Berhad, said MR DIY would face deletion if it drops to 36th or below, adding that United Plantations Bhd being the likely replacement, if it were to happen.

Meanwhile, IOI Corp Bhd also may be at risk of exclusion due to liquidity requirements. As per FTSE’s rules, existing constituents must pass at least eight out of 12 months of liquidity tests. IOI Corp can only afford to fail one more month of liquidity test before they are at risk of deletion.

What is an exclusion and why does it happen?

An exlusion, also called a delisting, from the FBM KLCI is means a company’s shares are no longer traded on the stock exchange.

It could happen due to a number of reasons including:

  1. The company is shutting down, either voluntarily or by court order.
  2. Maturity or expiry of listed product including bonds, warrants or structured products.
  3. Failure to follow Bursa Malaysia’s rules or securities laws and is ordered to close.
  4. Financial distress.
  5. Delisted on another stock exchange.
  6. Deemed unsuitable for continued listing (e.g. poor governance or inactive business).

What happens to a company when it’s excluded from FMB KLCI?

When a company is delisted from the FBM KLCI (Bursa Malaysia), its shares are removed from official trading, becoming highly illiquid and difficult to sell, often resulting in significant value loss.

While ownership remains, shareholders may lose easy market access, and the company is no longer under direct exchange regulations, though they still hold rights to assets during liquidation.

To maintain its position on the FBM KLCI, a company must continuously satisfy three primary criteria during the semi-annual reviews held every June and December.

Market Capitalisation Threshold

  • Ranking Requirement: To avoid deletion, an existing constituent’s market cap rank must not fall to 36th or below.
  • Buffer Rule: If a company’s rank is between 31st and 35th, it may still stay on the index unless a non-constituent rises to 25th or above, at which point the lowest-ranked existing constituent is replaced.

Liquidity Screening

    A company must ensure its shares are traded frequently enough to remain “investable” for large funds.

    • The Velocity Test: For existing constituents, the stock must maintain a monthly median daily trading volume of at least 0.04% of its adjusted shares in issue.
    • Frequency: This test must be passed in at least eight out of the past 12 months leading up to the review. Failing this “8-of-12” rule is a common reason for deletion even if market cap is high.

    Free Float Minimum

    The “free float” is the portion of shares available for public trading, excluding restricted holdings like those held by founders, directors, or the government.

    • Requirement: A company must maintain a minimum free float of at least 15%.
    • Impact: Companies with very high “locked-up” shareholdings (e.g., family-owned or government-linked) may struggle to meet this if they do not periodically release more shares to the public.

    Beyond these, a company must avoid PN17 status (financial distress) or major restructuring that results in suspension, as these trigger automatic removal from the index.

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