Ahead of the regular adjustment of the Korean index by Morgan Stanley Capital International (MSCI), interest in the new inclusion candidates is growing. Hana Securities noted that if the stock prices of LIG Nex1 and Samyang Foods increase further this month, they could be newly included in the MSCI index.
MSCI adjusts its index components through regular reviews four times a year (in February, May, August, and November). Since global exchange-traded funds (ETFs) follow this index for investment, being newly included positively affects stock prices.
According to Hana Securities on the 3rd, the stocks to be included and excluded in next month's MSCI regular review will be determined based on market capitalization from the 20th to the 31st of this month. Research Institute member Lee Kyung-soo estimated that the market capitalization standard for inclusion in the MSCI index would be approximately 6.69 trillion won.
The stock most closely approaching the market capitalization based on the closing price today is LIG Nex1. The market capitalization of LIG Nex1 is 57.2 trillion won, meaning the stock price needs to rise about 17% in the remaining period to be included in the index.
Samyang Foods is also identified as a candidate for inclusion. Samyang Foods' market capitalization is 55.8 trillion won, falling approximately 20% short of the inclusion standard. It appears that both LIG Nex1 and Samyang Foods will need to set new all-time highs to enter the MSCI index.
HD Hyundai Mipo has a market capitalization of 51.1 trillion won, and its stock price needs to jump 30.9%. This is a level it has not reached since the shipbuilding industry experienced its biggest boom in 2007. Additionally, Doosan, Hanwha Systems, Rainbow Robotics, and LigaChem Biosciences would need their stock prices to increase by about 40-60%. Thus, there are virtually no stocks with a high likelihood of inclusion in the MSCI's February regular review.
However, this Research Institute member evaluated that considering the trend of timing for investing in anticipated MSCI inclusion candidates, it is better to maintain investment in LIG Nex1, Samyang Foods, and HD Hyundai Mipo, even if they are not included in this regular review. He noted, "Even if the stocks fail to get included, if there are no special negative factors, maintaining expectations for inclusion in the May regular review could be a valid strategy."
Conversely, there could be significant removals from the MSCI index centered around petrochemical and secondary battery stocks, which have experienced prolonged underperformance. This Research Institute member explained that Kumho Petrochemical, Lotte Chemical, L&F, Enchem, POSCO DX, and Ecopro are among those likely to be removed.
The position of Korean stocks within the MSCI index is gradually decreasing. Last year alone, 10 stocks were removed, leaving the number of Korean stocks in the index at 92. The proportion of South Korea in the MSCI Emerging Markets (EM) index fell below 10%.
The MSCI index is considered one of the most influential stock indices in the world. When included in the MSCI index, funds following the index tend to buy in, positively impacting stock prices and supply-demand aspects. Conversely, removals lead to a withdrawal of passive funds that follow the index.