MSCI will announce stocks for inclusion and exclusion in its Korea Index regular review on August 13, according to the financial investment industry on July 9. MSCI conducts index rebalancing four times annually in February, May, August, and November. Inclusion in the index typically attracts buying from global passive funds tracking the index, positively impacting stock prices. This August review uses estimated thresholds of approximately 14.1 trillion won for market capitalization and 4.4 trillion won for free-float market capitalization.
Market participants typically see buying interest in inclusion candidate stocks starting 45 days before the announcement date, with price increases continuing until the announcement. Hyundai Engineering & Construction, announced as an inclusion stock on February 11, recorded a 60% stock price increase over approximately 45 days from December 28 to February 10. The May review had no inclusion stocks.
LG Innotek Leads Inclusion Candidates with 17.5 Trillion Won Market Cap
Securities firms cite LG Innotek, LS, and Samsung E&A as inclusion candidates for this regular review. LG Innotek has the highest inclusion probability among the candidates. As of July 9, LG Innotek's total market capitalization stands at approximately 17.5373 trillion won, with free-float market capitalization at approximately 11.6 trillion won, significantly exceeding both thresholds.
LS and Samsung E&A's inclusion possibilities depend on whether exclusion stocks emerge. The index maintains a fixed number of constituent stocks, creating potential openings if exclusions occur. Both stocks meet the free-float market cap threshold but fall short of the total market cap requirement. Based on closing prices on July 9, LS requires an additional 34.9% stock price increase and Samsung E&A needs 52.9% more to meet the market cap threshold.
POSCO International and Samsung EPIS Holdings Face Exclusion Risk
LG Display, Yuhan Corporation, POSCO International, and Samsung EPIS Holdings face high exclusion probability. These stocks fail to meet at least one of the two criteria—market capitalization or free-float market capitalization—as of July 9. POSCO International falls short of the free-float market cap threshold by 25%, while Samsung EPIS Holdings misses it by 13%. Kim Dong-young, a researcher at Samsung Securities, stated that unless significant stock price increases occur before the review, POSCO International and Samsung EPIS Holdings will find it difficult to avoid exclusion.
MSCI Shortens Observation Period for Warning and Risk-Designated Stocks
Securities firms expect MSCI's recently changed regulations to apply to this regular review. MSCI shortened the observation period for inclusion restrictions based on investment warning or risk stock designation from "the pricing reference date of the previous regular review to three business days before this regular change application date" to "the pricing reference date of this regular review to three business days before the regular change application date." Kim Dong-young described this as a relaxation measure to reduce cases where inclusion was restricted solely due to past investment warning or risk stock designation. The rule change comment period runs until July 17. Since July 17 is also the pricing reference date for the August regular review, the change may apply immediately to this review.
FAQ
What stocks are expected to join the MSCI Korea Index in August?
LG Innotek is the strongest inclusion candidate with a market capitalization of 17.5373 trillion won and free-float market cap of 11.6 trillion won as of July 9, both exceeding the thresholds of 14.1 trillion won and 4.4 trillion won. LS and Samsung E&A are also candidates but depend on whether exclusion stocks emerge.
Why might POSCO International and Samsung EPIS Holdings be excluded from the MSCI Korea Index?
POSCO International falls short of the free-float market cap threshold by 25%, and Samsung EPIS Holdings misses it by 13% as of July 9. Without significant stock price increases before the review, both stocks face high exclusion probability according to Samsung Securities researcher Kim Dong-young.
