Exchange, "Decides Not to Apply 30% Market Cap Cap on Samsung Electronics Early"

[Asia Economy Reporter Oh Ju-yeon] Although the Korea Exchange announced at the beginning of the year that it would review the possibility of applying the market capitalization weight cap (CAP) on Samsung Electronics on an ad hoc basis, it decided not to apply it early after gathering industry opinions.

On the 19th, the Korea Exchange stated that due to the recent increase in Samsung Electronics' inclusion weight in the KOSPI 200 index, it considered conducting an early market cap adjustment around March, before the regular adjustment in June, to disperse market shocks. However, after receiving opinions that index users would have insufficient time to respond, it decided not to proceed with the early adjustment.

Samsung Electronics' stock price rose from 50,400 KRW as of December 2 last year to 62,400 KRW as of the 20th of last month, increasing its share of the KOSPI 200 index market capitalization from 29.8% to 33.5%.

In response, the Exchange mentioned that from the perspective of index diversification effects and risk management, it is inappropriate for a single stock to exceed a 30% weight, and that ad hoc changes could be made before the regular adjustment.

The 30% market capitalization weight cap was introduced in June last year to mitigate excessive concentration on specific stocks in major stock indices such as the KOSPI 200. If a single stock's market cap weight exceeds 30%, the weight is forcibly reduced.

Accordingly, some expressed concerns about fluctuations in Samsung Electronics' supply and demand, but the securities industry viewed the possibility of an ad hoc adjustment as low.

The Exchange stated, "The application of the cap to the KOSPI 200 index will be reviewed alongside the regular adjustment of the KOSPI 200 constituent stocks scheduled for June."