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While South Korea’s main bourse Kospi has stayed confined in a range of around 3,200-3,300 points for a month, market watchers are paying close attention to which stocks will be added to the Morgan Stanley Capital International’s index in an upcoming announcement.
The US-based finance firm is slated to announce August’s quarterly review result of the MSCI Korea Index on Aug. 12. Since foreign capital is expected to flow into listed companies that newly join the index, the forthcoming event is anticipated to give a positive effect to local stock indexes, according to experts Friday.
“EcoPro BM, SK ie technology and Kakao Games have a possibility to join the equity index (next month), considering the estimation of market capitalization reference point,” said Noh Dong-kil, an analyst at NH Investment & Securities. “If the companies meet the expectation, EcoPro BM will have the strongest index effect.”
Some market watchers at the same time forecast that LG Household & Health Care’s preferred stocks are likely to be removed, as the company fails to meet market cap standards. SK Telecom’s weighting on the MSCI Korea Index is also likely to be reduced by 25 percent, amid a rising portion of foreign ownership due to treasury shares retirement, they said.
The key standards for index inclusion and weighting are a firm’s market value and the proportion of that value that is publicly traded on the stock market. A company with a bigger market cap has a greater chance of being added to the index, but a firm with reduced market cap could be eliminated.
While the rebalancing sell-off of SK Telecom shares after the index change is predicted to mark around 916.4 billion won ($798.2 million), Yuanta Securities Korea analyst Choi Nam-gon said a short-term adjustment in the firm’s stock price would be inevitable.
Other experts further gave an outlook that KakaoBank and Krafton, which are scheduled to make Kospi market debuts in the next month, are likely to be included in the index earlier than expected.
“Both KakaoBank and Krafton meet the MSCI index early entry standards in terms of market value and liquidity ratio of 20 percent. ... KakaoBank is expected to join the equity index after market’s closing of Aug. 18 while Krafton is forecast to be included after the bell of Aug. 23,” NH Investment & Securities strategist Heo Yule said.
Meanwhile, the Kospi fell 1.24 percent to close at 3,202.32 points Friday. Offshore investors extended their selling spree for a third consecutive session and sold a net 716.9 billion won. Institutional investors turned net sellers and offloaded a net 576.7 billion won.
The nation’s tech-heavy Kosdaq also dipped 1.24 percent to 1,031.14 at the closing bell. Foreigners sold a net 123.9 billion won, while institutional investors extended net sell-offs to a fifth consecutive session, dumping a net 124.3 billion won.
By Jie Ye-eun (email@example.com