Morgan Stanley Capital International (MSCI) has included the Hong Kong shares (H shares) of China's CATL, the world's largest battery manufacturer, as a special inclusion in the Emerging Markets Index. As a result of the inclusion of CATL H shares, South Korea's weighting in the Emerging Markets Index will decrease further.
According to Shinhan Investment Corporation on the 22nd, MSCI announced the special inclusion of CATL H shares the previous day. CATL was listed on the Hong Kong Stock Exchange on the 20th. CATL is expected to account for 0.04% of the Emerging Markets Index, leading to an influx of passive funds estimated at $198 million (about 270 billion won).
Researcher Cho Min-kyu at Shinhan Investment Corporation noted, "As of the previous day's closing price, the market capitalization of CATL H shares is $6.717 billion, and the free float market capitalization is $3.694 billion, meeting all the requirements for special inclusion."
Rebalancing will take place on the 30th in accordance with the results of the review conducted in May regarding stocks to be excluded or included. With CATL H shares entering the Emerging Markets Index, 25.4 billion won of passive funds is expected to exit the domestic stock market. This includes 6.3 billion won from Samsung Electronics, 2.6 billion won from SK hynix, 900 million won from Samsung Electronics preferred shares, and 900 million won from KB Financial.
Researcher Cho stated, "The outflow of passive funds is expected to be 0.3% compared to the daily trading volume of the KOSPI market, so its impact on supply and demand will be limited."
The weighting of South Korean stocks in the MSCI Emerging Markets Index is expected to decrease from 9.249% to 9.245%. The share of South Korean stocks in the Emerging Markets Index has been on a decline since breaking the 10% mark in December of last year. Currently, the weighting by country is 29.5% for China, 19.2% for India, and 17% for Taiwan.
The MSCI index is considered to be the most influential stock index in the world. MSCI changes the components of the index based on market capitalization and free float market capitalization every February, May, August, and November. However, special inclusion is possible if certain conditions are met.