As Korean companies’ weight in the Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index has recently been reduced, Korea’s weight also fell from second to third in country rankings.
Koran companies’ weight in the MSCI EM Index decreased from 12.19 percent at the end of October to 11.56 percent at the end of November.
The weight of Chinese companies, which account for the most substantial proportion of the index, rose from 31.85 percent to 34.02 percent during this period due to a rebalancing. MSCI completed the third round of including China A-shares (listed in mainland China) in the EM Index on Nov. 26.
The weight of Taiwanese firms in the EM Index also dropped slightly from 11.92 percent at the end of October to 11.72 percent. However, Taiwan rose to second place ahead of South Korea in country weight rankings as it suffered a smaller drop in weight than the latter.
The recent MSCI index rebalancing and uncertainties in the U.S.-China trade negotiations prompted foreign investors to sell Korean stocks.
If South Korea's weight in the MSCI index decreases, funds following the index may flow out of the Seoul stock market.
Over the same period, India's weight in the MSCI EM Index increased from 8.96 percent to 9.12 percent, while Brazil's weight dropped from 7.68 percent to 7.15 percent.
The weight of Samsung Electronics, which ranks fourth in the index, fell from 3.71 percent in late October to 3.51 percent in late November. Samsung Electronics is the only Korean company in the top 10 in the index.
Among the top players in the index, the weight of China’s Alibaba Group increased from 4.50 percent to 5.84 percent, and that of Tencent Holdings from 4.19 percent to 4.20 percent. The weight of TSMC, a Taiwanese semiconductor company, decreased from 4.33 percent to 4.25 percent.
The MSCI Index is a representative benchmark index that global investors use as the base for their investment decisions. It is divided into three categories: the Developed Markets (DM), Emerging Markets (EM), and Frontier Markets (FM).
The EM Index is calculated for companies in 26 major emerging markets worldwide, including Asia and Latin America. It consisted of 1,410 stocks as of end-November.