The two major domestic benchmark stock indices, the KOSPI 200 index and the KOSDAQ 150 index, will see changes in their constituent stocks. Considering that this is the first regular adjustment since the full resumption of short selling, significant volatility is expected.
According to the Korea Exchange on the 24th, the Stock Indices Operating Committee will hold a meeting on the 27th to review the stocks that will be added or removed from the KOSPI 200 index and KOSDAQ 150 index and their weights. The committee will evaluate based on the average daily market capitalization and trading volume over a six-month period from November 2024 to April 2025. The KOSPI 200 index and KOSDAQ 150 index undergo regular changes every June and December. The rebalancing that will be applied on June 13th is based on the adjustments made in the KOSPI 200 and KOSDAQ 150 indices.
Stocks likely to be added to the KOSPI 200 index during this regular adjustment include HD Hyundai Marine Solution, DN AUTOMOTIVE, HDC, Hankuk Carbon, Dongwon Industries, Miwon Specialty Chemical, and Young Poong. Among these, Miwon Specialty Chemical and Dongwon Industries, with an average daily trading volume of 2.5 billion won and 2.2 billion won respectively this month, may see significant stock price movements due to passive fund inflows that follow the index.
Potential stocks to be removed from the KOSPI 200 index include LX International, Doosan Fuel Cell, SK Networks, PI Advanced Materials, ILJIN Hysolus, Hansei Industry, and SAM-A ALUMINIUM. Opinions suggest that the impact on stock price volatility will not be substantial, as the removal stocks already had the lowest weight within the index.
The KOSDAQ 150 index will also see changes in its constituent stocks. Expected stocks to be added include HIGEN RNM, Taesung, HLB Life Science, Dongsung Finetec, SungKwang Bend, Philoptics, STCube, FADU, Korea Ratings, and Joongang Advanced Materials. Korea Ratings, which has a daily trading volume of around 200 million won, is expected to experience significant stock price volatility due to its inclusion in the KOSDAQ 150 index.
Securities companies believe that Openedges Technology, ITM Semiconductor, MNtech, MOTREX, PROTEC, KGINICIS, Maeil Dairies, Yunsung F&C, TEMC, and NEPES have a high likelihood of being removed from the KOSDAQ 150 index. Most of the removal stocks have less than an average daily trading volume of 500 million won, suggesting insufficient liquidity which could heighten price volatility risks.
This regular adjustment of the KOSPI 200 and KOSDAQ 150 indices is particularly significant as it is the first to occur following the full resumption of short selling. Short selling pressure may arise centered around the removal stocks. Short selling is an investment technique where one borrows shares to sell them in anticipation of a price drop, planning to repurchase the shares later to return them.
During the regular adjustment, changes in the free float ratio also warrant attention as they affect the weights within the index. Free float shares are stocks that can be freely traded, excluding those owned by major shareholders, related parties, treasury shares, and employee stocks.
In the case of Samsung C&T, it burned shares amounting to 4.4% (787,563 shares) of its issued stock in February. Consequently, it is estimated that the free float ratio has increased by nearly 6 percentage points, potentially allowing for additional passive fund inflows during this regular adjustment.
Conversely, Korea Zinc is estimated to have seen a decrease of about 7 percentage points in its free float ratio due to the management dispute between Chairman Choi Yoon-beom and MBK Partners and Young Poong, indicating that passive funds may exit further after the rebalancing.
In addition, LIG Nex1 and Ecopro are expected to see increases in their free float ratios, whereas Meriz Financial Group, Mistow Holdings, and LX Holdings are likely to experience decreases.