Markets
MSCI adds SK Bioscience, SKIET, EcoPro BM to Korea Index
KMW removed; Krafton, Kakao Games not included
By Aug 12, 2021 (Gmt+09:00)
2
Min read
Most Read
Alibaba eyes 1st investment in Korean e-commerce platform
Blackstone signs over $1 bn deal with MBK for 1st exit in Korea
Korea's Lotte Insurance put on market for around $1.5 bn
OCI to invest up to $1.5 bn in Malaysia’s polysilicon plant
NPS loses $1.2 bn in local stocks in Q1 on weak battery shares
Global index provider Morgan Stanley Capital International (MSCI) added SK IE Technology Co. (SKIET), SK Bioscience Co. and EcoPro BM Co. to its Korean Index, in a move to attract part of some $52 billion global passive funds to those stocks.
The MSCI announced on Aug. 11 that it included those shares in its quarterly change, while removing KMW Inc. The change is set to take effect from Sept. 1.
The size of the global exchange traded fund (ETF) and the index fund linked to the MSCI Korea Index amounts to some 60 trillion won ($51.6 billion). Passive funds, which track market indices, are likely to buy those newly added shares.
SK Bioscience, a vaccine maker, is expected to see 340 billion won in fresh funds and EcoPro BM, a battery materials producer, is predicted to enjoy 200 billion won inflows, according to the local brokerage industry. SKIET, SK Innovation Co.’s battery materials subsidiary, is forecast to see some 175 billion won incoming. SK Bioscience’s market capitalization was 23 trillion won and SKIET was 14.4 trillion won as of Aug. 11. EcoPro BM was 6.8 trillion won. On the other hand, KMW, a 5G equipment maker, is expected to see 80 billion won in outflows due to the dropout.
SKT WEIGHT SHRINKS
SK Telecom Co.’s (SKT) weight in the index shrank to a quarter of its earlier level since its foreign ownership increased after cancelling its treasury stocks in May. The MSCI's weight adjustment of a stock that has limit on foreign shareholding depends on the amount of equity that foreign investors can buy more of. The adjustment is expected to lead to SKT suffering fund outflows of 550 billion won. Its market capitalization is 21 trillion won. SKT’s shares, however, unexpectedly surged 6.5%.
“The marker forecast for the outflows was smaller than initially expected, easing concerns over a selloff,” said Yuanta Securities Korea analyst Choi Nam-gon. “Given improving earnings and better dividend policies, some speculated inflows from global active funds despite outflows from passive funds.”
Krafton Inc. and Kakao Games Corp. failed to be included in the MSCI Korean Index. The MSCI is likely to add the game developers during a rebalancing in November, the stock market sources speculated.
ALREADY OUTPERFORMING
An inclusion in the index is a major positive factor for a stock. SK Bioscience, SKIET and EcoPro BM outperformed the overall market with their returns 54% higher on average than the market in the 45 days to Aug. 11. After the MSCI announcement, SKIET and EcoPro BM closed up 7.4% and 2.3%, respectively, on Aug. 12. SK Bioscience, however, lost 4.8% on various factors, including an announcement of stock sales by the company’s executives and employees.
“It is a usual investment strategy using an MSCI index change to buy on the announcement day and then sell on the rebalancing day since passive funds usually inflow at simultaneous bids and offers on the rebalancing day,” said a Shinhan Investment Corp. analyst Noh Dong-gil.
“Shares are more likely to outpace the overall market until the day of actual inclusion. But they tend to underperform in the next 10-30 days after the inclusion,” said a Eugene Investment & Securities analyst Kang Song-chul.
Write to Hyeong-Gyo Seo and Ji-Yeon Sul at seogyo@hankyung.com
Jongwoo Cheon edited this article.
The MSCI announced on Aug. 11 that it included those shares in its quarterly change, while removing KMW Inc. The change is set to take effect from Sept. 1.
The size of the global exchange traded fund (ETF) and the index fund linked to the MSCI Korea Index amounts to some 60 trillion won ($51.6 billion). Passive funds, which track market indices, are likely to buy those newly added shares.
SK Bioscience, a vaccine maker, is expected to see 340 billion won in fresh funds and EcoPro BM, a battery materials producer, is predicted to enjoy 200 billion won inflows, according to the local brokerage industry. SKIET, SK Innovation Co.’s battery materials subsidiary, is forecast to see some 175 billion won incoming. SK Bioscience’s market capitalization was 23 trillion won and SKIET was 14.4 trillion won as of Aug. 11. EcoPro BM was 6.8 trillion won. On the other hand, KMW, a 5G equipment maker, is expected to see 80 billion won in outflows due to the dropout.
SKT WEIGHT SHRINKS
SK Telecom Co.’s (SKT) weight in the index shrank to a quarter of its earlier level since its foreign ownership increased after cancelling its treasury stocks in May. The MSCI's weight adjustment of a stock that has limit on foreign shareholding depends on the amount of equity that foreign investors can buy more of. The adjustment is expected to lead to SKT suffering fund outflows of 550 billion won. Its market capitalization is 21 trillion won. SKT’s shares, however, unexpectedly surged 6.5%.
“The marker forecast for the outflows was smaller than initially expected, easing concerns over a selloff,” said Yuanta Securities Korea analyst Choi Nam-gon. “Given improving earnings and better dividend policies, some speculated inflows from global active funds despite outflows from passive funds.”
Krafton Inc. and Kakao Games Corp. failed to be included in the MSCI Korean Index. The MSCI is likely to add the game developers during a rebalancing in November, the stock market sources speculated.
ALREADY OUTPERFORMING
An inclusion in the index is a major positive factor for a stock. SK Bioscience, SKIET and EcoPro BM outperformed the overall market with their returns 54% higher on average than the market in the 45 days to Aug. 11. After the MSCI announcement, SKIET and EcoPro BM closed up 7.4% and 2.3%, respectively, on Aug. 12. SK Bioscience, however, lost 4.8% on various factors, including an announcement of stock sales by the company’s executives and employees.
“It is a usual investment strategy using an MSCI index change to buy on the announcement day and then sell on the rebalancing day since passive funds usually inflow at simultaneous bids and offers on the rebalancing day,” said a Shinhan Investment Corp. analyst Noh Dong-gil.
“Shares are more likely to outpace the overall market until the day of actual inclusion. But they tend to underperform in the next 10-30 days after the inclusion,” said a Eugene Investment & Securities analyst Kang Song-chul.
Write to Hyeong-Gyo Seo and Ji-Yeon Sul at seogyo@hankyung.com
Jongwoo Cheon edited this article.
More to Read
-
Korean stock marketHD Hyundai Electric likely to join MSCI Korea: Samsung Securities
Apr 19, 2024 (Gmt+09:00)
-
EconomyIn Korean food prices, everything’s up: Now it’s dried seaweed's turn
Apr 18, 2024 (Gmt+09:00)
-
Foreign exchangeKorean won at 17-month low on Middle East woes, Fed rate view
Apr 16, 2024 (Gmt+09:00)
Comment 0
LOG IN