Loneliest Stock Index in Developed World Risks Shrinking Again

(Bloomberg) -- The developed world’s least-populated national stock benchmark may shrink even more, after a rule change dropping the requirement for a minimum number of constituents.

Portugal’s PSI 20 Index will change its name to PSI and will no longer need to have at least 18 members filling its 20 vacancies as of March 2022, exchange operator Euronext NV said late Thursday.

Among existing members, Novabase SGPS, Ramada Investimentos E Industria SA, Pharol SGPS and Ibersol SGPS all currently fail Euronext’s criteria that companies have a minimum free-float market value of 100 million euros ($117.6 million).

“That means the new PSI could lose these four companies when the rules come into effect next year,” said Antonio Pedro Fonseca, head of trading at Banco Invest. “Given the size of our stock market, it could probably make sense for Euronext to lower the free-float market minimum requirement for more companies to be eligible to join the index.”

Euronext has struggled to find eligible candidates for Portugal’s benchmark since the collapse of the Espirito Santo banking empire in 2014. The rise of private equity deals in the past decade has further starved the market of liquidity, such as toll-road operator Brisa-Auto Estradas de Portugal’s takeover by a group of investors last year.

The exchange operator said its latest changes aim to increase the “attractiveness of the index by improving its quality.”

In terms of quantity, however, even the broader PSI All-Share Index is suffering. It has shrunk from 50 members in 2014 to 38 at present. Last month’s initial public offering by biomass energy company Greenvolt-Energias Renovaveis SA was the only major listing in the country since 2014.

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