With Morgan Stanley Capital International (MSCI) set to announce its August quarterly review results in roughly two weeks, attention is intensifying across South Korea’s securities industry over which stocks will be added to or removed from the MSCI Korea Index. The MSCI indices are among the most influential investment benchmarks globally, and inclusion can trigger automatic inflows of hundreds of billions of won in passive funds that track the index.<\/p>\n
According to the securities industry on the 27th, MSCI is scheduled to officially announce the results of its August quarterly review on the morning of August 13. MSCI conducts regular adjustments to its index constituents four times a year \u2014 in February, May, August, and November \u2014 based on criteria including market capitalization and free-float market cap. During the May review, three stocks \u2014 Hanjin Kal, HD Hyundai Marine Solution, and SK Biopharmaceuticals \u2014 were removed, reducing the number of constituents in the MSCI Korea Index from 80 to 77.<\/p>\n
For this August review, at least one new addition is widely anticipated. LG Innotek is considered the strongest candidate for inclusion. Based on the closing price on July 24, LG Innotek’s market capitalization stood at 14.79 trillion won (approximately $10.1 billion), substantially exceeding the estimated inclusion cutoff of approximately 11.5 trillion won (approximately $7.8 billion) cited for this review.<\/p>\n
“LG Innotek significantly exceeds the inclusion thresholds for both total market cap and free-float market cap, making its addition nearly certain,” said Kim Dong-young, an analyst at Samsung Securities. “The probability of inclusion is very high.”<\/p>\n
However, forecasts for additional inclusion candidates beyond LG Innotek diverge among brokerages. Daol Investment & Securities has identified LS and Samsung E&A as potential additions, while Shinhan Securities has put forward LG CNS and Hyundai AutoEver. “For August, we are focusing on the potential inclusion of LG Innotek, LG CNS, and Hyundai AutoEver, along with the associated passive fund inflows,” said Ha Geon-hyung, an analyst at Shinhan Securities.<\/p>\n
On the deletion side, LG Display, Posco International, and Samsung Epis Holdings are commonly cited as likely candidates for removal. These stocks have seen their market capitalizations shrink significantly amid recent share price corrections, increasing the risk that they will fall below the deletion threshold.<\/p>\n
Views on deletion candidates also differ markedly among securities firms. Samsung Securities rates HLB as having the highest probability of removal. HLB’s share price has plunged 40% this month, causing its market cap to shrink from 6.93 trillion won (approximately $4.7 billion) at the end of last month to 4.17 trillion won (approximately $2.8 billion) as of July 24. “HLB currently has the lowest market cap among existing constituents, making it the most likely candidate for deletion,” analyst Kim Dong-young explained. “We see Posco International, Samsung Epis Holdings, and LG Display as the next most likely, in that order.”<\/p>\n
In contrast, Daol Investment & Securities excluded HLB from its deletion forecast and instead included Yuhan Corporation on the list. “Stocks being mentioned as potential deletion candidates include Yuhan Corporation, LG Display, Posco International, and Samsung Epis Holdings,” said Cho Byung-hyun, an analyst at Daol Investment & Securities.<\/p>\n
With extreme market volatility causing sharp swings in individual stock prices recently, brokerages’ inclusion and deletion forecasts appear to have become far more challenging than in the past. “Given the exceptionally high market volatility lately, our inclusion and deletion forecasts have been constantly shifting,” analyst Kim Dong-young noted. “There has been much greater variability in stock predictions compared to other periods.”<\/p>\n
The securities industry generally observes that stocks expected to be added to the MSCI index tend to show price strength leading up to the rebalancing date, driven by inclusion expectations. Conversely, stocks anticipated for deletion are likely to underperform due to concerns over fund outflows.<\/p>\n
“LG Innotek has undergone a price correction over the past month or two, so inclusion expectations are not yet fully reflected,” Kim Dong-young said. “If related news continues to emerge, there is potential for further upside.” Regarding the expected deletion candidates, however, he cautioned investors, noting that “it is difficult to say they have fallen significantly yet, so there remains room for further downside.”<\/p>\n","protected":false},"excerpt":{"rendered":"With Morgan Stanley Capital International (MSCI) set to announce its August quarterly review results in roughly two weeks,…\n","protected":false},"author":2,"featured_media":100453,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[10288,50225,315,1343,2482,314,9450,51956,10888,465,11759,984,6446],"class_list":["post-100452","post","type-post","status-publish","format-standard","has-post-thumbnail","category-lg","tag-daol-investment-securities","tag-hlb","tag-lg","tag-lg-cns","tag-lg-display","tag-lg-group","tag-lg-innotek","tag-ls","tag-msci","tag-posco-international","tag-samsung-epis-holdings","tag-samsung-securities","tag-shinhan-securities"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/100452","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=100452"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/100452\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/100453"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=100452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=100452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=100452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}