MSCI, formerly Morgan Stanley Capital International, is an American provider support tool widely used as investment guidance.
In the May 2018 Semi-Annual Index Review for the MSCI Equity Indexes released Monday, MSCI unveiled five Korean won-denominated shares to be added starting June 1.
New to the MSCI Korea list were lifeboat maker HLB, builder Samsung Engineering, game software developer Pearl Abyss and pharmaceutical firms ViroMed and Celltrion Pharm.
Except for Samsung Engineering, trading on the top-tier Kospi, the remaining four are trading on the second-tier Kosdaq.
On the other hand, three constituents -- jet engine maker Hanwha Aerospace, auto parts maker Hyundai Wia and petroleum product distributor SK Networks -- will be removed from the index from June, MSCI added. The share prices of the three firms, all listed on the Kospi, took 2.1 percent, 1.9 percent and 2.2 percent losses, respectively.
The news indicated that MSCI’s Korea index is increasingly weighted toward the biopharmaceuticals sector, wrote Ha In-hwan, an analyst at SK Securities.
“A majority of new constituents are shares in the biopharma sector,” he wrote, citing ViroMed, Celltrion Pharm. and HLB‘s biopharma drugmaker subsidiaries, including San Francisco-based LSK BioPartners.
Ha said the newly added constituents could draw heavier influxes especially before the indexes start tracking those firms.
Meanwhile, Korea‘s top-tier stock market dipped 0.7 percent on Tuesday, on resurfacing concern about decreased passive influx of investments into Korean constituents through globally tracked indexes. The second-tier Kosdaq climbed 0.5 percent.
This comes amid the partial addition of 234 yuan-denominated China A stocks into the MSCI China Index. The additions are estimated to represent some 0.4 percent in the MSCI Emerging Markets Index.
“MSCI‘s index review will affect Korean stock markets, and an impact from foreign sell-off is inevitable, but the degree of the impact is limited,” said Seo Sang-young, an analyst at Kiwoom Securities.
All constituents of the MSCI Korea Index and MSCI China Index are tracked by the MSCI EM Index.
As of April, South Korean constituents’ market cap in the MSCI EM Index accounted for 15.6 percent, the second-largest in the MSCI following China‘s 30.1 percent.
Of 845 constituents from 24 countries, South Korea currently has 113, covering 85 percent of the Korean equity markets.
By Son Ji-hyoung