According to Morgan Stanley Capital International (MSCI)'s May regular review results, Hanwha System and Samyang Foods have been included in the Standard (large+mid-cap) index composition. While there is a high possibility that index-tracking funds will flow in, evaluations suggest that it is difficult to expect additional surges in stock prices, considering the trend of prices moving in advance.

According to the financial investment industry on the 14th, the rebalancing of the stocks that will be included and excluded based on the MSCI May regular review will take place on the 30th. Eugene Securities projected that approximately 210 billion won and 170 billion won in funds would flow into Samyang Foods and Hanwha System, respectively.

MSCI logo. /Courtesy of Reuters·Yonhap News

EcoPro and NCSOFT, which will be removed from the Standard index, are expected to see sell-off demands of approximately 70 billion won and 100 billion won, respectively.

Woori Financial Group, POSCO Holdings, KT&G, Hanwha Ocean, among others, are expected to benefit from a supply and demand effect of around 1 times the average daily trading volume due to adjustments in liquidity ratios and number of shares. Meriz Financial Group and Samsung C&T are anticipated to see some passive funds following the MSCI index withdraw due to a decrease in weight.

However, there is a consensus that it is difficult to expect the phenomenon of "the monster born of passive funds" as it was in the past. This is because the stock prices of individual stocks with a high likelihood of being included in the MSCI index tend to move in advance.

Kang Seung-cheol, a researcher at Eugene Securities, noted, "Since last year, the increase in stock prices or excess revenue compared to the KOSPI index after the announcement of new stocks included in the MSCI has been at an ordinary level of less than 5%," and added, "A month after actual inclusion, stock prices fell by an average of about 4% instead."

Kim Dong-young, a researcher at Samsung Securities, also said, "Recently, the phenomenon of stocks pre-reflecting during MSCI events has repeatedly appeared," and added, "Expectations for stock price surges in the period after the announcement of inclusion should be somewhat lowered."

The MSCI index is considered the most influential stock index in the world. MSCI modifies its index composition based on market capitalization and free float market capitalization every February, May, August, and November.

Potential candidates for inclusion in MSCI's upcoming August regular review include LIG Nex1, Doosan, HD Hyundai Mipo, and HD Hyundai Marine Solution based on market capitalization. Ko Kyung-beom, a researcher at Yuanta Securities Korea, said, "LIG Nex1, Doosan, and HD Hyundai Mipo have already reached the market capitalization that meets the conditions for August inclusion, but the potential for additional upside is limited due to excessively speculative positions."