In the KOSPI market, when the index based on market capitalization size is changed, the proverb 'better a dragon's tail than a snake's head' seems to apply. The stock prices of companies moving from the mid-cap index to the large-cap index have decreased, while those transitioning from the large-cap index to the mid-cap index have increased.
According to Eugene Securities on the 25th, the KOSPI size index changes are made every March and September on the futures expiration date. This year's futures expiration date is March 13. Based on the average market capitalization over the three months prior to the expiration date, the top 100 stocks comprise the large-cap index, stocks ranked 101 to 300 make up the mid-cap index, and those ranked 301 and beyond fall into the small-cap index.
Eugene Securities analyzed the stock price trends from the announcement of index changes to the date of change from 2010 to 2024, finding that stocks transitioning from large-cap to mid-cap have outperformed the KOSPI index by an average of 5.9 percentage points during the same period. In contrast, stocks moving from mid-cap to large-cap have underperformed the KOSPI index by an average of 3.6 percentage points.
This difference is attributed to the market capitalization proportion held in the indexes. New stocks included in the large-cap index inherently have a smaller market capitalization proportion within it, making fund inflow into the large-cap index difficult to expect. Conversely, stocks moving to the mid-cap index become top-tier stocks within that index, resulting in increased fund inflow. Research Institute Kang Song-cheol noted, 'Among the entrusted management funds from major domestic pension funds, the size allocated for mid-and small-cap management is estimated to be around 5 trillion won.'
Research Institute Kang highlighted stocks such as POSCO DX, Hyundai Steel, Kumyang, LOTTE Chemical, COSMO AM&T, and others as likely candidates to move from the large-cap index to the mid-cap index. Considering the effects of size index changes, these stocks could see an increase in their prices.
In contrast, potential candidates for moving from the mid-cap index to the large-cap index include Hanwha System, Doosan, Hyosung Heavy Industries, BNK Financial Group, Kangwon Land, and JB Financial Group.
What about stocks moving from the small-cap index to the mid-cap index? From 2010 to last year, stocks transitioning from before the index change to the date of change had a KOSPI index growth rate about 2.8 percentage points higher than the overall index.
Research Institute Kang advised to pay more attention to stocks that transition from the small-cap index to the mid-cap index. He stated, 'Unlike stocks that move from the large-cap index to the mid-cap index and achieve short-term excess revenue based on supply and demand, those moving from the small-cap index to the mid-cap index possess both the expectation of additional buying funds and the momentum for stock price increases.'
Research Institute Kang named stocks with potential to transition from the small-cap index to the mid-cap index, including Hanwha REIT, Hwaseung Enterprise, Gaon Cable, STX Engine, Pharmicell, ZINUS, HJ Shipbuilding & Construction, Bionote, Sejin Heavy Industries, SNT Energy, and Samyang Corporation.