Ahead of the regular review of the Morgan Stanley Capital International (MSCI) Korea Index scheduled for August, investor interest is focused on the stocks expected to be included. In the securities industry, advice has been given that proactive betting is necessary as the prices of stocks with a high probability of inclusion in the MSCI index tend to move ahead.
According to the financial investment industry on the 21st, the results of the regular review of the MSCI Korea Index will be announced on August 13. MSCI adjusts its constituent stocks four times a year in February, May, August, and November. The criteria for admission and removal include market capitalization and floating market capitalization. MSCI is one of the most influential stock indices in the global financial market, and stocks included can expect an influx of global passive funds.
However, to expect revenue, it is essential to confirm the stocks to be included in advance due to the substantial anticipatory reflection effect. Lee Kyung-soo, a researcher at Hana Securities, noted, "We need to keep in mind the timing for betting on the accelerated MSCI candidates," and explained, "Based on the MSCI in August, there is a high possibility that stock prices will peak in mid-July."
According to Hana Securities, the stocks newly included in or considered likely to be included in the MSCI index over the past two years generally saw their stock prices rise until mid-July, then temporarily declined, and rebounded again by mid-August review. After the review date, stock prices tended to drop.
In the securities industry, it is expected that 2 to 3 new stocks may be included in August. Samsung Securities listed LIG Nex1, Doosan, HD Hyundai Marine Solution, Hyundai Mipo, and Hyundai E&C as the predicted new inclusion candidates. Hana Securities assessed that the inclusion likelihood for LIG Nex1 and Doosan is high. As corporations related to shipbuilding, defense, and nuclear power are showing sharp increases in stock prices, new inclusion stocks are anticipated to emerge from related industries.
For the stocks expected to be removed, Samsung Securities pointed to SKC and LG Innotek due to their market capitalization being among the lowest levels. Hana Securities mentioned HD Hyundai Mipo and Hanwha. However, the actual decision on removals will be finalized based on the market capitalization in mid to late July.
Earlier, in May of this year, Samyang Foods and Hanwha Systems were included in the Standard (large and mid-sized stocks) index constituents. In contrast, NCSOFT and ECOPRO Materials were removed. ECOPRO Materials was affected by a decline in stock prices due to poor performance in the electric vehicle battery sector, while NCSOFT was removed due to failing to meet the market capitalization criteria.
Meanwhile, investor attention is also focused on whether Korea will be included in the MSCI developed market index, as inclusion is expected to bring foreign capital inflow and stabilize the currency.
MSCI will announce whether Korea is included in the Watch List on the 25th. To be included in the developed market index, it must be designated as a Watch List candidate for at least a year, making this announcement a critical first step.
However, in the 'Market Accessibility Evaluation' released on the 20th, Korea received a disappointing assessment. This has increased uncertainty regarding the possibility of being included in the Watch List. MSCI noted some improvements in short-selling accessibility but pointed out that accessibility in key areas such as dividend record dates, foreign exchange markets, and over-the-counter trading systems remains low.
Ko Kyung-beom, a researcher at Yuanta Securities Korea, stated, "The evaluation of market accessibility revealed a significant gap between the authorities' perceptions and what MSCI actually verifies," and added, "Other than marginal improvements in the foreign exchange market this year, there has been no overall progress, so the possibility of being listed is low."
If MSCI classifies Korea as a candidate for inclusion as a 'Watch List' on the 25th, it will undergo a year-long evaluation. If it meets the criteria, an inclusion announcement may be made in June next year, with actual inclusion possible by the end of May 2027.
Yeom Dong-chan, a researcher at Korea Investment Securities, mentioned, "If included, Korea's weight in the index may decrease, which could lead to capital outflows," yet emphasized the necessity of including in the developed market index, noting that if it remains in the emerging market index, benefits would inevitably diminish due to the influences of China and Vietnam.
MSCI classifies global stock markets into developed, emerging, and frontier markets. Korea is currently classified as an emerging market along with India and China. In 2008, Korea was placed on the Watch List for inclusion in the MSCI developed market but failed due to a lack of accessibility. Since 2014, it has also been excluded from the Watch List.