HD Hyundai Electric likely to join MSCI Korea: Samsung Securities

HD Hyundai Electric Co., Alteogen Inc. and Enchem Co. are expected to be invited to join Morgan Stanley Capital International’s Korea Index when the global stock index provider conducts regular index rebalancing next month, according to Samsung Securities Co.

The probability of the trio’s inclusion in the MSCI Korea Index in May is 90%, based on their closing stock prices as of Wednesday, Kim Dong-young, an analyst at Samsung Securities, said in a report released on Friday.

MSCI Inc. rebalances MSCI indexes, including the MSCI Korea Index, in February, May, August and November every year by adding new members or removing existing ones based on both full and float-adjusted market capitalization.

Foreign institutional investors, investing in Korean stocks through index-tracking passive funds, closely follow the MSCI Korea Index.

Inclusion in the index tends to increase foreign buying, leading to a rise in share prices.

HEALTHY STOCK MOVE

“Thanks to the recent rise in their stock prices, Alteogen, HD Hyundai Electric and Enchem all meet both full and float-adjusted market capitalization requirements,” said Kim, adding that the three stocks’ recent gains are not considered the index provider’s “extreme price increase” cases.  

Samsung Securities projected that Alteogen, HD Hyundai Electric and Enchem would attract 180 billion won ($130 million), 140 billion won and 85 billion won, respectively, once they join the MSCI Korea index next month.

Korea’s main stock bourse Kospi-listed HD Hyundai Electronic is the electrical and electronic equipment-making unit of the world’s largest shipbuilding group holding firm HD Hyundai Co.

The stock has steadily climbed after the company turned around in 2020, reporting consecutive profits since then.

Alteogen is a biotech company, developing long-acting biobetters, proprietary antibody-drug conjugates and antibody biosimilars. Enchem produces and sells electrolytes, a core lithium-ion battery component, and functional additives.  

The two are listed on the secondary Kosdaq market.

KAKAO PAY’S EARLY DEPARTURE

During the rebalance next month, Kakao Pay Corp., the mobile payment arm of Korean internet giant Kakao Corp., will likely be kicked out of the MSCI Korea index just 15 months after its inclusion in the index, projected Samsung Securities.

Kakao Pay joined the MSCI Korea Index in February 2023.

Hanon Systems Corp., a world-leading heat pump systems maker for automobiles, is another candidate set to leave the index next month. 

“It is almost certain that Kakao Pay and Hanon Systems will be expelled from the index as their float market cap dips below the required level due to their poor stock performance,” said Kim.

KT Corp., one of Korea’s top three telecom companies, is expected to see its weighting in the index halved following a recent rise in foreign stake holdings to 45.6% from 40% early this year, added Kim.

HD Hyundai Electric shares ended up 2.1% at 244,000 won on Friday after recouping early losses. But Alteogen and Enchem declined 4.4% to close at 168,400 won and 5.1% to end at 299,500 won, respectively.

Kakao Pay and Hanon Systems retreated 1.6% to close at 33,200 won and 3% to end at 4,880 won, respectively.

The Kospi and Kosdaq also sank more than 1.6% due to dampened hopes for any imminent rate cuts in both the US and Korea following US Federal Reserve Chair Jerome Powell’s hawkish tone on accommodative monetary policy.   

Write to A-Young Yoon at youngmoney@hankyung.com

Sookyung Seo edited this article.