Additions: Samyang Foods, Hanwha Systems
Deletions: Ecopro Materials, NCSoft
Estimated Passive Inflows: Samyang Foods ₩210B ($155M), Hanwha Systems ₩170B ($125M)
Estimated Passive Outflows: Ecopro Materials ₩700B ($515M), NCSoft ₩1T ($735M)
Korea’s weight in the MSCI Emerging Markets Index is projected to decrease by just 0.03 percentage points
Opinion
-While index inclusion often triggers short-term inflows, historical data suggests that many stocks tend to decline after actual index inclusion.
-MSCI-related price action is often driven more by near-term expectations than fundamental changes.
-As such, the inclusion effect should be interpreted as part of a broader, long-term capital reallocation rather than a sustained momentum signal.
Core Sell Point
MSCI inclusions can lead to short-term price spikes due to passive inflows, but these often give way to profit-taking post-inclusion. A tactical response may be warranted.
In MSCI’s May 2025 quarterly index rebalancing, Samyang Foods and Hanwha Systems were added to the Korea index, while Ecopro Materials and NCSoft were removed. The total number of constituents remains unchanged at 81. These changes will take effect after market close on May 30.
As MSCI indices are widely tracked by global passive funds, newly added stocks often experience meaningful fund inflows. According to market estimates, Samyang Foods could see around ₩210 billion in new inflows, and Hanwha Systems approximately ₩170 billion. On the other hand, the deletions could trigger outflows totaling roughly ₩1.7 trillion.
However, a closer look at past data shows that index additions often underperform after inclusion, with many experiencing declines in the month following the rebalance. While anticipation often boosts prices ahead of inclusion, actual passive buying may be followed by profit-taking.
Despite the rebalancing, Korea’s weighting in the MSCI Emerging Markets Index is set to decrease only 0.03%, which suggests limited risk of broader capital flight from Korean equities.
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Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
