SK hynix Gains Weight in MSCI...580 Billion Won in Foreign Funds Set to Flow In

[Financial News] As SK hynix’s weighting in the Morgan Stanley Capital International (MSCI) Emerging Markets Index increases, around 580 billion won in index-tracking funds are expected to flow in. With no additions to or deletions from the MSCI Korea Standard Index, the increase in SK hynix’s weighting has emerged as a factor affecting month-end supply and demand.
According to the financial investment industry on the 15th, SK hynix’s weighting in the Emerging Markets Index rose by 0.12 percentage points, from 4.49% to 4.61%, in MSCI’s November regular review. The brokerage industry estimates net purchases of 585 billion won as a result. The rebalancing stemming from this change will take place on the 30th, and the revised index will take effect on December 1.
The increase in weighting reflects the rise in the number of shares following the issuance of U.S. American depositary receipts (ADRs) last July. The number of SK hynix shares used in MSCI index calculations rose from 713 million to 730 million. The free-float ratio remained at 77.5%, but the increase in the number of shares counted also raised the company’s weighting in the index.
There were no additions to or deletions from the Korean Standard Index in this regular review. The Standard Index is a benchmark composed of large- and mid-cap stocks. Even when the constituents remain unchanged, changes in the number of shares or free-float ratios of existing constituents can adjust their weightings, prompting funds that track the index to shift as well.
However, whether the expected inflow of funds will lead to a rise in the share price is another matter. On the 13th, SK hynix closed at 1,216,000 won, down 3.03% from the previous trading day. The share price weakened despite expectations of buying prompted by the higher index weighting.
Kim Dong-young, a researcher at Samsung Securities Co., Ltd., explained, “The expected purchases amount to around 10% of the stock’s average daily trading value, so the actual impact is limited. Although buying demand of several hundred billion won is expected, given SK hynix’s usual trading volume, it is not enough to significantly alter supply and demand.”
Share buybacks are a factor to watch going forward. This review reflected the increase in the number of shares resulting from the ADR issuance, but showed no change in the free-float ratio due to share buybacks since August. Analysts say this may mean that the effects of the buybacks have yet to be reflected or that they did not meet the criteria for a change in the free-float ratio.
Kim said, “Share buybacks reduce the number of shares available for trading in the market, so they could be a factor in adjusting the index weighting in the next review. Since a share buyback worth 20 trillion won is still under way, I believe the overall impact of the buybacks is likely to be reflected later, in the next quarterly review.”
[email protected] Choi Doo-seon Reporter