Ahead of the regular May changes by global stock index provider Morgan Stanley Capital International (MSCI), the possibility has been raised that there will be another removal of Korean stocks from the index without any inclusions. This indicates that the position of the Korean stock market within the MSCI index may be narrowing.
According to the financial investment industry on the 14th, MSCI conducts its regular review four times a year (in February, May, August, and November) to change the index composition. Stocks for the May regular changes will be selected based on market capitalization and float-adjusted market capitalization on a day between the 17th and 30th. MSCI will announce the results of the regular changes on the 14th of the following month, and rebalancing will take place on the 30th of the same month.
During MSCI's regular changes in February, there were no new inclusions among domestic stocks, and only 11 stocks were removed. Ko Kyung-beom, a researcher at Yuanta Securities Korea, said it is difficult to rule out the possibility that there will be only removals without any inclusions in this May's regular changes. Ko noted, "Since U.S. President Donald Trump announced universal and reciprocal tariffs, volatility in the domestic and foreign stock markets has increased, making the uncertainty regarding removals and inclusions greater."
Among domestic stocks, Samyang Foods and Hanwha System are being pointed out as having the largest likelihood of inclusion in the May regular changes. However, these stocks would also need to experience a rise of approximately 10% to stabilize. The inclusion prospects for LIG Nex1, Doosan, and HD Hyundai Marine Solution are considered low, as they would need to see an even greater increase in stock price.
On the other hand, NCSOFT, LG Innotek, and Ecopro are experiencing poor stock performance, increasing the likelihood of their removal. CJ CheilJedang, SKC, and LG Display are also possible candidates for removal.
If a large-scale removal occurs again without any inclusions, the number of Korean stocks in the MSCI Standard (large + mid-cap) index could fall below 80. The number of stocks, which had exceeded 100 in 2023, has continued to decrease to 81 as a result of the February regular changes. The MSCI index is considered one of the most influential stock indices in the world. Funds tracking this index are substantial, so being excluded from it may be detrimental from a supply-demand perspective.