11 South Korean companies, including Samsung E&A and LG Chem Preferred, were removed from the MSCI EM Index, with no new additions.
Korea’s weight in the MSCI EM Index declined from 9.35% to 9.19% following this adjustment.
LG Chem Preferred, Netmarble, and other excluded stocks are expected to see heightened short-term volatility due to significant foreign fund outflows relative to trading volume.
Opinion
The removal of these stocks from the MSCI Index will likely lead to unavoidable foreign capital outflows, increasing short-term downward pressure on their prices. In particular, stocks with high foreign outflow ratios relative to their trading volume may experience elevated market volatility, requiring investors to exercise caution.
Core Sell Point
Stocks excluded from the MSCI index face significant capital outflows and increased price volatility, necessitating short-term risk management strategies.
A total of 11 South Korean companies, including Lotte Chemical, LG Chem Preferred, and Netmarble, have been removed from the MSCI Korea Index, which serves as a key benchmark for global investors. As the MSCI index guides international capital flows, the exclusion of these stocks is expected to trigger foreign fund outflows, putting downward pressure on their share prices. In particular, LG Chem Preferred, Netmarble, and GS are likely to experience heightened short-term volatility, as their estimated outflows represent a significant portion of their average daily trading volume.
With this rebalancing, Korea’s weight in the MSCI Emerging Markets (EM) Index has been reduced from 9.35% to 9.19%, reflecting a decline in foreign investor interest in the Korean stock market. If global capital outflows from the Korean market accelerate, it could further weigh on the overall liquidity and stability of the domestic stock market.
Analysts warn that the MSCI exclusions could lead to an outflow of approximately KRW 164 billion from Samsung E&A alone, while LG Chem Preferred and Netmarble face significant capital outflows relative to their trading volume, increasing short-term price volatility. Investors should be prepared for potential price corrections in these excluded stocks.
