SK Telecom Removed from MSCI... "Foreigners' Short-Term Selling Pressure Will Increase"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Myung-hwan Lee] SK Telecom has been excluded from the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI), raising concerns among securities firms that foreign investors may engage in short-term selling. Meanwhile, Kakao Pay, which failed to be included in this quarter's review, is expected to be added in November.

According to the financial investment industry on the 14th, MSCI added 13 stocks and removed 8 stocks from the ACWI based on the quarterly review results announced on the 12th. Among the stocks listed on the domestic stock market, SK Telecom was excluded from the index due to its high foreign ownership ratio. MSCI decides on index inclusion or exclusion by considering the limit on foreign ownership for stocks with foreign ownership caps and the additional acquisition capacity available to foreign investors.

Regarding SK Telecom's exclusion, there is an analysis that short-term selling pressure from foreign investors will increase. Dong-young Kim, a researcher at Samsung Securities, estimated, "The actual supply and demand impact of MSCI tracking funds due to SK Telecom's exclusion is about 100 billion KRW," adding, "It is highly likely that foreign selling pressure related to the index exclusion will continue until the end of the month." Hyeol Heo, a researcher at NH Investment & Securities, also noted, "With SK Telecom excluded from the MSCI index, passive funds such as exchange-traded funds (ETFs) tracking the index will sell SK Telecom at the closing price on August 31," estimating the expected selling volume at 69.2 billion KRW.

No stocks listed domestically were newly added to the index. Although there were expectations for Kakao Pay's inclusion, it was not included due to insufficient market capitalization. However, analysis suggests that Kakao Pay could be included in the next index revision. Jaerim Lee, a researcher at Shinhan Financial Investment, stated, "Kakao Pay failed to be included because it did not meet the free float market capitalization threshold," adding, "It is expected to be included in the index during the next semi-annual review scheduled for November, as a lower free float market capitalization hurdle will be applied."

Following this quarter's review, the market capitalization of the MSCI Korea Index is expected to increase slightly. According to NH Investment & Securities, the market capitalization of the MSCI Korea Index is expected to rise marginally from the previous 762.9 billion USD to 763.2 billion USD. The market capitalization of the MSCI Emerging Markets (EM) Index is also expected to increase slightly from 6.45 trillion USD to 6.48 trillion USD.

The MSCI ACWI is calculated based on 2,897 stocks from 23 developed countries and 24 emerging countries. Among these, approximately 1,380 stocks are from emerging markets. China holds the largest weight at 32%, followed by Taiwan, India, and Korea.