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The KLSE Index, or FTSE Bursa Malaysia KLCI is one of the key indicators of the Malaysian stock market. It is composed of the 30 stocks listed on Bursa Malaysia with the largest market capitalisation.
On this page, we’ll take you through a quick history of the KLSE Index, explain how the companies it tracks are selected, and let you know how you can invest in the index.
The KLSE Index started out in 1986 as the Kuala Lumpur Composite Index (KLCI). At this point, its base level was backdated to the 1st January 1977 and set at 100 index points on this date. The index continued under this name until the 21st century, changing the name to the FTSE Bursa Malaysia KLCI on 6th July 2009. This move was prompted by partnering with FTSE in order to bring the KLCI up to international standards of calculation and transparency, therefore making the index more tradeable.
The FTSE Bursa Malaysia KLCI has performed well over time, with an all-time high of 1896.23 being recorded in July 2014. The KSLE index suffered falls in both the dotcom crash of the early 2000s and the financial crisis of 2007-08, but didn’t suffer as badly from these as some other indices across the world, and largely shows a gradual uptrend throughout the time it has been tracking the Malaysian economy.
In order to be tracked by the KLSE index, a company’s stock market capitalisation must be in the top 30 out of the listings on Bursa Malaysia. In addition to this, each company must meet certain requirements in terms of free float percentage and liquidity.
Each company must have a free-float market capitalisation of at least 15%, and at least 10% of its free-float-adjusted shares must be traded annually. This ensures that the KLSE index tracks stocks that are both well-performing and commonly traded, enabling it to give an insight into market conditions in Malaysia.
Investing in the KLSE index can be done in a variety of ways, with the easiest option being an ETF. An exchange-traded fund (ETF) is a financial product designed to mirror the performance of an index (such as the FTSE Bursa Malaysia KLCI), but which can also be traded on an exchange at any point during market trading hours. This means investors benefit from the diversification of investing in an index, but also retain the flexibility of being able to make short-term trades.
Other options for investing in the KLSE index are mutual funds and simply buying each of the 30 stocks that the index tracks. These are both viable options that work well for holding your position for the long term if you believe the Malaysian economy is looking bullish.