[Market Focus] Korea Zinc Drops Over 4% After Removal from MSCI Index

The stock price of Korea Zinc, which was removed from the Morgan Stanley Capital International (MSCI) Index, is showing weakness.

As of 11:05 a.m. on January 6, Korea Zinc was trading at 1,247,000 won, down 60,000 won (-4.59%) from the previous trading day.

The decline on this day is interpreted as being influenced by its removal from the MSCI Index in connection with a paid-in capital increase being conducted to fund the construction of a smelter in Tennessee, United States. Foreign securities firms such as Merrill Lynch and Citigroup were also listed among the top sellers.

Previously, MSCI announced on January 5 the ad hoc removal of Korea Zinc from the MSCI Index. The effective start date for this ad hoc removal is January 12, and the application date based on the market close is January 9.

Kim Dongyoung, a researcher at Samsung Securities, said, "On January 9, there is a possibility that selling by tracking funds due to this index action will be concentrated," adding, "The primary reason for the change is the decline in the free float ratio and free float market capitalization due to the reflection of the paid-in capital increase event allocated to third parties for investment in the U.S. smelter."

He continued, "In the case of Korea Zinc, the MSCI free float ratio had already fallen to 20% due to existing strategic investors. With this paid-in capital increase, MSCI evaluated the post-change free float ratio as less than 15%. Accordingly, under the low free float ratio exception, the company failed to meet the conditions for remaining in the index due to the strict application of free float market capitalization."

Additionally, Kim estimated, "The amount of selling by tracking funds due to the removal is approximately 171 billion won, which is about 2.9 times the average daily trading value."