EcoPro, Hanwha Ocean, JYP among top MSCI inclusion candidates

EcoPro Co., Hanwha Ocean Co., JYP Entertainment Corp. and Kumyang Co. are the top candidates for inclusion in the MSCI Korea Index when the global stock index provider conducts regular index rebalancing next month, according to a forecast by six South Korean securities companies.

All six picked EcoPro, a battery materials maker, as the most likely company to enter the index when MSCI Inc. announces new additions to its Korea index on Aug. 11.

Listed on Korea’s tech-heavy Kosdaq market, EcoPro is the world’s largest maker of cathodes, a key battery part.

Three brokerages chose Hanwha Ocean — formerly Daewoo Shipbuilding & Marine Engineering Co. (DSME) — as a likely candidate.

Analysts expect a market cap of 4.4 trillion won-4.8 trillion won ($3.5 billion-$3.8 trillion) to be the cutoff for index inclusion. Hanwha’s market cap stands at 10 trillion won.

“Hanwha’s shares have outperformed the benchmark Kospi index by more than double since early this year,” said Eugene Investment & Securities analyst Kang Song-chul.

“The company’s profit declined most of last year but is making a turnaround this year, supporting its stock price's upward trend.”

JYP, the music label behind K-pop girl groups TWICE and ITZY, and Kumyang, a battery materials maker, is also viewed as strong candidates by the brokerages.

The MSCI Korea Index is closely followed by foreign institutional investors investing in Korean stocks through index-tracking passive funds.

Inclusion in the index tends to increase foreign buying, leading to a rise in share prices.

EXIT CANDIDATES

Once new entries are announced, actual index changes will be made on Aug. 31.

The six brokerages that provided forecasts are Samsung Securities, Hana Securities, Shinhan Investment Corp., Yuanta Securities, Eugene Investment & Securities and Daol Investment & Securities.

Two of the six picked Hyundai Rotem Co. and SK Telecom Co. as likely candidates while Samsung Securities said Hyundai AutoEver Corp. and CS Wind Corp. stand a chance to enter the index.

From May 2019 to May of this year, 32 stocks were added to the MSCI Korea Index.

All six brokerages believed CJ Corp. would be excluded from the index next month.

Other candidates for exclusion are Netmarble Corp., Emart Inc., Lotte Energy Materials Corp., Kakao Games Corp. and Pan Ocean Co.

NOT READY FOR DEVELOPED MARKET STATUS

Earlier this month, MSCI said the Korean stock market isn’t ready for developed market status despite a series of reforms, dampening the country’s hopes of attracting more foreign investors by joining the global elite market club.

MSCI has cited Korea’s opaque stock-related rules and foreign ownership limits as "the Korea discount," or reasons for not raising the country to developed market status.

The global index compiler has also taken issue with the country’s poor market accessibility since Korea was first categorized as an emerging market in 1992.

Along with economic development, market size and liquidity level, market accessibility is one of the key criteria the MSCI uses to categorize a country as a developed, emerging or frontier market.

Other global stock market index providers, such as Dow Jones, S&P and FTSE, have classified the Korean equity market as developed.

Write to Byeong-Hun Yang at hun@hankyung.com
In-Soo Nam edited this article.