[E-Daily Reporter Hyera Lee ] With MSCI (Morgan Stanley Capital International) set to conduct its regular review of the Korea Index next month, attention is focused on stocks expected to be added or removed from the index. Since inclusion in the MSCI index typically has a positive impact on stock prices, stocks expected to be newly added are drawing particular attention.

According to the financial investment industry on the 9th, MSCI is scheduled to announce the stocks to be added or removed during its regular review on August 13.
MSCI conducts index rebalancing four times a year—in February, May, August, and November. When a stock is newly included in the index, buying pressure from global passive funds tracking the index tends to flow in, which can have a positive impact on the stock price. Consequently, buying interest typically surges in stocks expected to be included starting 45 days before the announcement date, often leading to a rise in stock prices through the announcement date. HyundaiEngineering&Construction(000720), announced as an inclusion candidate on February 11, recorded a 60% increase in its stock price over approximately 45 days, from December 28 of last year to February 10. There were no inclusion candidates in the May review.
MSCI determines which stocks to include or exclude based on market capitalization and free-float market capitalization. A stock must meet both criteria to be newly included. The market capitalization and free-float market capitalization thresholds for this regular review are estimated to be approximately 14.1 trillion won and 4.4 trillion won, respectively.
The securities industry is citing LG Innotek(011070), LS(006260), and #SamsungE&A as candidates for inclusion in this regular review.
Among these, LG Innotek is considered the most likely candidate for inclusion. As of today, LG Innotek’s total market capitalization stands at approximately 17.5373 trillion won, and its free-float market capitalization at approximately 11.6 trillion won, significantly exceeding both thresholds.
For LS and SamsungE&A, the likelihood of inclusion is expected to depend on whether any stocks are delisted from the index. Analysts suggest that if any stocks are removed from the index to maintain the number of constituent stocks, these two companies are likely to fill the vacancies. While both meet the free-float market capitalization criteria, they fall short of the total market capitalization threshold. Based on today’s closing prices, it is estimated that LS would need an additional price increase of about 34.9% and SamsungE&A about 52.9% to meet the market capitalization requirement.
On the other hand, stocks considered likely to be delisted include LG Display(034220), Yuhan(000100), POSCO INTERNATIONAL(047050), and SAMSUNG EPIS HOLDINGS. As of today, these stocks fail to meet at least one of the two criteria: market capitalization or free-float market capitalization.
Kim Dong-young, an analyst at SamsungSecurities, noted, “Since POSCO INTERNATIONAL and SAMSUNG EPIS HOLDINGS fall short of the free-float market capitalization criteria by 25% and 13%, respectively, it will be difficult for them to avoid exclusion unless their stock prices rise significantly before the review.”
The securities industry believes it is highly likely that MSCI’s recently revised regulations will be applied in this regular review. MSCI recently shortened the observation period for inclusion restrictions resulting from investment warnings or designations as high-risk stocks—from “the price calculation reference date of the most recent regular review to three business days prior to the effective date of this regular change” to “the price calculation reference date of this regular review to three business days prior to the effective date of this regular change.”
Researcher Kim stated, “This is a kind of relaxation measure aimed at reducing cases where inclusion was restricted solely because a stock was previously designated as an investment warning or high-risk stock,” adding, “Public comments on this proposed rule change are being accepted until the 17th of this month. Since the 17th is the price determination date for the August regular review, we must also consider the possibility that the changes will be applied immediately starting with this review.”