Will Kabang and Krafton Be Included Early in MSCI?

[Asia Economy Reporter Hwang Junho] KakaoBank and Krafton will be listed on the 6th and 10th of next month, respectively. Coincidentally, the Morgan Stanley Capital International (MSCI) index will also be revised in the same month. If these two stocks are included in the MSCI, stock price improvement is expected due to the inflow of passive funds.

The financial investment industry forecasted on the 30th that if the two stocks are listed early next month, whether funds flow in through inclusion in various indices will influence stock price movements.

For the KOSPI 200, both stocks are highly likely to be included. The inclusion requirement is that the average market capitalization over 15 days after the listing date must rank within the top 50 among KOSPI common stocks. According to the prospectus, KakaoBank's base market capitalization is 18.5 trillion KRW, and Krafton's is 24.4 trillion KRW, which is very large to fall short of this condition.

Inclusion in the MSCI index is also possible. The early inclusion criteria require a total market capitalization of at least 6 trillion KRW and a free float market capitalization of at least 3 trillion KRW.

KakaoBank's possible free float market capitalization range is between 3.5 trillion KRW and 5 trillion KRW. As long as KakaoBank's stock price does not fall below the lower end of the initial public offering price band of 33,000 KRW, the free float market capitalization will not drop below 3 trillion KRW. If early inclusion is decided, the inclusion in the index will occur after the market closes on the 10th business day after listing, which is the 20th of next month.

For Krafton, the possible free float market capitalization range according to the prospectus is between 7.3 trillion KRW and 10 trillion KRW. This greatly exceeds the MSCI early inclusion criteria. If Krafton's initial stock price does not halve compared to the offering price, it is expected to be smoothly included early in the MSCI. Krafton is likely to be included after the market closes on the 31st, the application date of the August quarterly review.

Kim Dong-young, a researcher at Samsung Securities' Global Investment Strategy Team, analyzed, "Free float market capitalization involves a lot of MSCI's discretionary judgment, so there may be errors in prediction," adding, "KakaoBank's estimated weight in the MSCI EM and MSCI Korea indices is about 0.04% and 0.28%, respectively, while Krafton's is expected to be 0.08% and 0.58%."