Ahead of the Morgan Stanley Capital International (MSCI) May regular review on the 13th of this month, the outline of stock changes within Korea's equity market is becoming clearer. Market observers are leaning toward a scenario in which Rainbow Robotics is added to the index while Hanjin KAL is removed.
According to the financial investment industry on Monday, Rainbow Robotics is considered the most likely candidate for inclusion, backed by its superior market capitalization during the evaluation period. Hanjin KAL, by contrast, is seen as facing a high likelihood of exclusion after failing to meet the free-float market capitalization threshold.
Securities analysts estimate the probability of Rainbow Robotics' inclusion at around 70 percent. However, variables remain, given that Korea's equity market has recently outperformed developed markets even on a dollar basis. Should the number of constituents in the index expand, Kiwoom Securities is also being mentioned as a possible inclusion candidate.
The MSCI index, a global stock index calculated by U.S. investment bank Morgan Stanley, undergoes regular revisions four times a year in February, May, August and November. Stocks are selected based on criteria such as market capitalization and free-float market capitalization, and inclusion in the index is regarded as a major event affecting individual stock prices, as passive fund inflows are anticipated.
The market expects investment attention to naturally shift to August following this May regular review. In particular, the stock price evaluation period that determines August inclusion runs from mid-to-late July, overlapping with the second-quarter earnings season. Analysts say this raises the need for preemptive positioning centered on stocks with high earnings expectations.
"Interest is needed in MSCI candidates where second-quarter earnings expectations are rising," said Lee Kyung-soo, an analyst at Hana Securities. "With Daewoo E&C, LS, ISU Petasys, Samsung E&A and Samsung Securities cited as leading candidates, an approach that considers earnings momentum is necessary."
