MSCI November Changes: Newly Included Stocks

[Asia Economy Reporter Song Hwajeong] As the Morgan Stanley Capital International (MSCI) November semi-annual review approaches, market interest in newly added and removed stocks is growing. Securities firms predict that SK Biopharm and SK Chemical have a high possibility of being included.

According to the industry, the MSCI semi-annual review will be announced on the morning of the 11th next month (Korean time). This semi-annual review is expected to have more stock replacements than the review in August. Kang Songcheol, a researcher at Shinhan Financial Investment, said, "The May and November semi-annual reviews have lower market capitalization criteria for stock replacement than the February and August quarterly reviews, so there tend to be more replaced stocks," adding, "With the market rising and many stocks increasing in price, there may be more stock replacements than in recent semi-annual reviews."

The stock most likely to be included is SK Biopharm. Researcher Kang analyzed, "Since SK Biopharm has passed three months since its listing, considering the release of the three-month lock-up volume for institutional investors at the time of the public offering, the freely tradable shares are estimated to exceed 15% of the total shares," and added, "With a market capitalization exceeding 10 trillion won, the free float market capitalization is also expected to exceed the criteria, so inclusion in the MSCI index is anticipated in this semi-annual review."

Other candidates for inclusion are SK Chemical, Doosan Heavy Industries & Construction, and Hanmi Science. Kim Dongyoung, a researcher at Samsung Securities, said, "We see a high possibility of addition for SK Biopharm, SK Chemical, and Doosan Heavy Industries & Construction," but noted, "Hanmi Science is unlikely to be included as it does not meet the free float market capitalization criteria." Candidates for removal include POSCO International, Ottogi, BNK Financial Group, and Lotte Holdings. Researcher Kim explained, "We expect roughly 2 to 3 additions and about 4 removals," adding, "There are cases of removal due to failure to meet free float market capitalization criteria, so the number of removed stocks will likely exceed the number of added stocks."

Passive fund inflows are expected for the included stocks. Lee Kyungsoo, a researcher at Hana Financial Investment, analyzed, "Among MSCI indices, the ones including Korea with significant scale are MSCI Emerging Markets (EM) and MSCI Asia indices, where Korea accounts for 9.5% and 6.8% respectively," and added, "Estimating the inflow by calculating the weight of newly added and removed stocks in each index, SK Biopharm is expected to attract 144.1 billion won, SK Chemical 145.4 billion won, Hanmi Science 67.9 billion won, and Doosan Heavy Industries & Construction 156.2 billion won."

There is also an opinion that investment strategies aligned with MSCI regular changes have performed relatively well in the past. Roh Donggil, a researcher at NH Investment & Securities, said, "The representative investment strategy for regular changes is to buy on the review announcement day and sell on the change day," adding, "Since the stocks to be added or removed are confirmed before proceeding, the risk of prediction errors can be excluded." Researcher Roh explained, "Since 2007, the average absolute return and relative return have been 5.4% and 6.7 percentage points respectively, showing good performance," and added, "If the added and removed stocks are anticipated and utilized in advance, the expected return is relatively higher." The change day after the review announcement is the 30th of next month.

This content was produced with the assistance of AI translation services.