Three enterprises join MSCI Korea Index, maintaining the total at 81 corporations
In a move that reflects the growing attractiveness of the South Korean market, Morgan Stanley Capital International Inc. (MSCI) has added three new companies to its Korea Index. The rebalancing of the index will take effect on Aug. 26.
The three companies joining the Korea Index are construction and robotics firm Doosan Co., defense firm LIG Nex1 Co., and electric motor maker Hyosung Heavy Industries Corp. On the other hand, leading food company CJ Cheiljedang Corp., electric components maker LG Innotek Co., and chemical products maker SKC Ltd. have been removed from the index.
The additions and exclusions are a result of MSCI’s regular index review process, which assesses eligibility based on factors such as market capitalization, liquidity, free-float adjustments, and investability criteria. These factors, evaluated systematically during the index review, determine which companies qualify for inclusion to reflect the Korean equity market accurately.
MSCI applies company assignment rules, investability requirements, and market capitalization thresholds to select constituents at each periodic review. The review aims to maintain index continuity and stability while integrating eligible companies that have grown or become more investable.
Positive regional trade developments may have also contributed to the additions. Korean stocks hit highs around August 2021, partly driven by optimism on trade deals between the US and Korea, which boosted risk sentiment for Korean equities.
It is worth noting that the inclusion is consistent with MSCI’s methodology that adjusts for free-float and issuer weight caps, ensuring no single company dominates the index beyond set limits.
The Korea Index, which now consists of 81 companies, is seen as a benchmark of the South Korean market. MSCI reviews the index every three months to reflect changes in the market capitalization of underlying securities. The August review will likely include more additions than exclusions, as market watchers had expected.
Changes to the Korea Index's constituents can affect the movements of passive funds tracking the index. As such, these additions and exclusions could potentially impact the overall performance of these funds.
References:
- Korea Herald
- MSCI Methodology Document
- Bloomberg
- The addition of Doosan Co., LIG Nex1 Co., and Hyosung Heavy Industries Corp. to the Korea Index suggests a stronger focus on finance and business, given their diverse portfolio and potential for growth in these sectors.
- The growing attractiveness of the South Korean market for finance and business, as reflected by MSCI's additions to the Korea Index, could influence other major index providers to follow suit, leading to increased investment in these areas.
