[Edaily Reporter Park Soon-yeop] Ahead of the FTSE Korea rebalancing, analysts have warned that investors should be mindful of supply-and-demand volatility at the market close due to adjustments in the weightings of #Samsung Electronics and #SK Hynix. In particular, since SK Hynix is expected to see a significant reduction in its index weighting, analysts say it is necessary to monitor the possibility of sell orders during the simultaneous auction at the market close.
Ko Kyung-beom, an analyst at Yuanta Securities, said on the 19th, “The key point to watch in today’s FTSE rebalancing is the adjustment of weightings for the top holdings in the FTSE Korea ETF,” adding, “Weighting caps may be applied to Samsung Electronics and SK Hynix.”

This FTSE rebalancing is expected to reflect the inclusion of companies such as #LIVESMED, #AIMDBIO, and #Algenomics in the FTSE Small Cap Index. However, the June regular rebalancing tends to be more of a “light rebalancing” that reflects the lagged inclusion of initial public offering (IPO) stocks, so its rebalancing effect has generally been less significant than that of the March and September rebalancings. The explanation is that this trend was even more pronounced for domestic stocks, as IPO momentum has weakened and overhang issues remain.
Nevertheless, supply-and-demand effects for individual stocks still exist. Analyst Ko focused more on the weight adjustments for Samsung Electronics and SK Hynix than on the newly included stocks in this rebalancing. Under U.S. RIC regulations, the weight of any single stock cannot exceed 25%, and the combined weight of stocks with weights of 5% or more is limited to 50%. Since the FTSE index applies a higher cap than this, the analysis concluded that Samsung Electronics’ weight would need to be reduced from 29.3% to 20.0%, and SK Hynix’s weight from 28.9% to 20.0%.
Looking at the asset size of Korea-tracking ETFs, the firm predicted that UK-listed ETFs would have a greater impact than U.S.-listed ETFs. While the net assets of FLKR (Franklin FTSE South Korea), a U.S.-listed ETF, stand at approximately $1.14 billion, those of FLXK (Franklin FTSE Korea UCITS), a UK-listed ETF, are significantly larger at $5.16 billion. Consequently, the report concludes that European and UK UCITS regulations are likely to have a greater impact than U.S. RIC regulations.
Under UCITS regulations, Samsung Electronics’ weighting is expected to rise slightly from 29.3% to 30.0%, while SK Hynix’s weighting is projected to fall from 28.9% to 18.0%. Based on the funds tracking the FTSE Korea ETF, Yuanta Securities estimated the sell-off demand from rebalancing for Samsung Electronics at 106.7 billion won and for SK Hynix at 1.0237 trillion won.
Looking solely at the nominal size of the ETF’s net assets, the impact of rebalancing demand on the overall market may not be significant. However, based on past cases, analysts note that supply and demand during the closing auction could affect stock prices. During the FTSE’s regular review last December, SK Hynix saw 4372억 won worth of sell orders hit the market during the closing auction, causing its stock price to plummet.
In recent rebalancing instances, there have been cases where the market anticipated the weight reduction in advance, causing intraday stock prices to fall or limiting gains, only for the closing price to remain at a neutral level as buy orders during the simultaneous order matching session were reflected. Samsung Electronics and SK Hynix exhibited this pattern during the MSCI EWY ETF rebalancing on February 27 and May 29, as well as the FTSE Korea rebalancing on March 20.
Nevertheless, Analyst Ko pointed out that the possibility of sell-off pressure on SK Hynix at the market close during this rebalancing is a variable worth noting. In particular, SK Hynix has risen 45.9% over the past month and 154.3% over the past three months, creating significant valuation pressure. This means that if rebalancing-driven selling pressure is concentrated at the market close rather than during the trading session, short-term volatility could increase.
Conversely, some stocks may benefit from the diversification effect within the index as the weightings of large-cap stocks are adjusted. Analyst Ko noted that stocks such as #SK Square and #Samsung Electro-Mechanics should be watched as potential beneficiaries of this diversification.