[Featured Stock] 'MSCI Small Cap Inclusion' Gukjeon Pharm Shows Strength on Expected Benefit from Russian Market Exit

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Kukjeon Pharmaceutical is showing strength on the 3rd following news that Morgan Stanley Capital International (MSCI) is considering excluding Russia from the emerging markets index.

As of 9:34 AM that day, Kukjeon Pharmaceutical was trading at 8,390 KRW, up 7.02% compared to the previous day.

Kukjeon Pharmaceutical was included in the MSCI Global Small Cap Index last November, and it appears to be benefiting from expectations related to Russia's MSCI exclusion.

On the same day, Kang Song-cheol, a researcher at Eugene Investment & Securities, stated, "MSCI is collecting feedback from index users regarding the reclassification of the Russia index," adding, "The plan includes handling Russian stocks within the index and reclassifying Russia from an emerging market (EM) to a standalone market."

A standalone market refers to countries not included in MSCI's developed markets index, emerging markets index, or frontier markets index. Currently, Ukraine, Bulgaria, Lebanon, and Palestine are classified as standalone markets. Russia is currently included in MSCI's emerging markets index, accounting for a 1.5% weighting as of the 1st.

Researcher Kang analyzed, "If Russia is excluded from the emerging markets index and the weights of other countries increase, a simple calculation shows that South Korea's weighting would increase by about 0.2 percentage points (from 12.2% to 12.4%). Calculating the passive (index-tracking) fund demand for Korean stocks, it amounts to approximately 700 million USD (about 800 billion KRW)."

He added that considering active funds, the purchase demand could increase to about 3.4 billion USD (4 trillion KRW), but "given the nature of active funds, which are relatively less sensitive to benchmark index changes, the demand for Korean bonds should be considered more conservatively." He also noted, "Index-related supply and demand could be a positive factor for Korea," and emphasized the need to "watch the MSCI index processing results closely."

Researcher Lee Kyung-soo of Hana Financial Investment also analyzed, "If Russia is excluded from the emerging markets index, foreign inflows into Korea based on passive funds alone would amount to about 800 billion KRW," adding, "Considering active funds tracking emerging markets, an additional inflow of about 3.1 trillion KRW is possible."

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