"MSCI November Review: HD Hyundai Marine Solution and APR Expected to Be Newly Included"

Korea Investment & Securities announced on October 17 that HD Hyundai Marine Solution and APR are highly likely to be newly included in the Morgan Stanley Capital International (MSCI) regular review for November. The company also suggested that, with about three weeks remaining until the announcement, trading strategies based on the potential inclusion of these stocks would remain effective.

Shin Chaerim, a researcher at Korea Investment & Securities, stated in the report "MSCI November Regular Review Outlook: Momentum at the Threshold of Inclusion" that "the November inclusions and exclusions are expected to occur within two stocks each."

First, regarding the possibility of new inclusions, Shin analyzed that HD Hyundai Marine Solution, which has shown strong stock price growth due to this year's shipbuilding industry rally, and APR, which ranked ninth in year-to-date (YTD) returns thanks to overseas market expansion, are most likely to be added. On the other hand, Orion and LG Household & Health Care were cited as stocks with a high likelihood of exclusion. Shin explained, "These stocks are among the lowest in market capitalization within the index," adding, "In particular, there is a high possibility that Orion will move to the MSCI Small Cap Index."

The November regular review is scheduled for around 6:00 a.m. KST on November 6. Shin noted, "In the past, the November review, which is the last review of the year, has shown significant changes in the inclusion and exclusion of Korean stocks. However, as the Korean stock market continues to perform well this year, the results of this November's regular review are expected to be relatively stable." After the regular review announcement, rebalancing will be reflected at the close of trading on November 26 KST, with the index changes taking effect on November 27.

Accordingly, Shin suggested that the opportunity right before inclusion is still valid. "Due to the nature of MSCI's regular changes, the index rebalancing date, when passive funds flow in, is important, but it is also crucial to prepare in advance for the review announcement date, when the rebalancing targets are revealed," Shin explained. "This is because inflows and rising stock prices tend to occur from the time leading up to the review announcement."

Shin also added, "Looking at past cases, the inclusion effect has typically lasted for about a month after the index changes, so it is worth paying close attention to both HD Hyundai Marine Solution and APR." She concluded that an 'event-driven trading' strategy based on this inclusion issue is considered effective.