Thursday, December 12, 2019
Passive Funds Expected to Dump Samsung Electronics Shares under Market Capitalization Cap
Other KOSPI 200 Companies Set to Benefit
Passive Funds Expected to Dump Samsung Electronics Shares under Market Capitalization Cap
  • By Yoon Young-sil
  • October 30, 2019, 09:11
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Eugene Investment said on Oct. 29 that some index-following passive investment funds will have to sell part of their Samsung Electronics shares if the stock becomes subject to the KOSPI 200 market capitalization cap.

“Those funds are likely to purchase other stocks constituting the KOSPI 200 index if Samsung Electronics becomes subject to the cap at the futures maturity of next month,” it explained, adding, “For example, approximately 150 billion won worth of Samsung Electronics shares are likely to be sold by passive funds that day if the stock exceeds the upper limit by 1 percent.” It went on to say that the fund outflow can adversely affect the price of Samsung Electronics shares but can have a positive effect on stocks with low trading volumes such as Namyang Dairy Products, Daekyo, Dongsuh and Sebang Global Battery.
 

The Korea Exchange introduced the KOSPI 200 market capitalization cap in June this year. Its purpose is to prevent any single company in the index from accounting for more than 30 percent of the total market capitalization of the index. The ratio is adjusted in the trading session following the futures maturity of June or December when the average ratio in the three-month period ending in the last trading session of May or November exceeds 30 percent.