As the August MSCI Korea Index review approaches, LG Innotek emerges as a frontrunner for inclusion, reflecting a market recovery and potential for significant passive inflows, despite conflicting predictions on index adjustments.
As the August MSCI Korea Index review approaches, attention has centred on whether LG Innotek can force its way into the benchmark and draw fresh passive inflows. In the run-up to the announcement, Korean brokerages said the company’s market value and free-float adjusted market capitalisation had recovered enough after last month’s sharp sell-off to make it the clear frontrunner, with Samsung Securities assigning it a full inclusion probability and estimating passive buying of about 313 billion won if it is added. Reuters-style market commentary in the local press has also highlighted HLB, POSCO International, Samsung EPS Holdings and LG Display as the main names at risk of removal.
The MSCI Korea Index is a key reference point for global institutions and exchange traded funds that track emerging market benchmarks, so even small changes can have outsized trading effects. Under MSCI’s schedule, the August review was due to be announced on August 13, with index changes normally implemented later in the month after a closing-price rebalance. The review uses market capitalisation and free-float market capitalisation as its main tests, which is why a stock’s recovery in the final stretch before the cut-off can alter its odds.
Still, the market has been warned not to chase the trade too aggressively. Eugene Investment & Securities said new additions have tended to outperform in the run-up to MSCI announcements but have often struggled on the day itself, making late buying less attractive than it first appears. A separate report from Asia Business Daily said the August review ultimately went in a different direction, naming Doosan, Hyosung Heavy Industries and LIG Nex1 as additions while removing CJ CheilJedang, LG Innotek and SKC, with rebalancing set for after the market close on August 26.
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