MSCI cut to have minimal effect: FSC

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CAPITAL LEAK:
An outflow of US$70 million is expected from an index cut of 0.02 percentage points, while China and South Korea have steeper adjustments of 0.08 points each

The latest decision by global index provider MSCI Inc to reduce Taiwan’s weighting in its main index is expected to have only a minor negative effect on the local equity market, the Financial Supervisory Commission (FSC) said on Friday.

The 0.02 percentage point drop to 13.35% in the MSCI Emerging Markets Index – which is closely watched by foreign institutional investors – is expected to trigger a capital outflow of NT$2.24 billion (71 .31 million), the commission said.

The expected outflow of funds would represent only 0.013 percent of the market capitalization held by foreign institutional investors, indicating a slight effect on the local stock market, he added.

Photo: Reuters

MSCI announced the results of its quarterly index adjustments on Friday morning. China and South Korea each saw the largest drop of 0.08 percentage points in their index weighting.

India and Turkey saw their weightings increase by 0.2 and 0.09 percentage points respectively, the two largest increases among emerging markets.

Despite the decline, MSCI raised Taiwan’s weighting in its MSCI All-Country Asia ex-Japan index and MSCI All-Country World index to 15.51% and 1.46% respectively, from 15.49% and 1, 45%.

Compared with the Chinese capital market, Taiwan has a strong legal mechanism in the foreign exchange market with better liquidity and corporate governance, while Taiwanese listed companies have embraced transparency in financial disclosure, it said. the Commission.

The local equity market remains attractive for foreign institutional investors, he added.

Along with quarterly index adjustments, MSCI added biotech firm PharmaEssentia Corp (藥華藥) and Taiwan Business Bank (臺灣企銀) to its MSCI Global Standard indexes after both stocks posted sharp gains in recent sessions.

The index provider removed Asmedia Technology Inc (祥碩科技), a designer of high-speed surface integrated circuits (ICs), from the index due to its recent share price plunge.

MSCI also added Asmedia to its MSCI Global Small Cap indices, along with nine other stocks, including Bora Pharmaceuticals Co (保瑞藥業), Delpha Construction Co (大華建設), property developer Farglory FTZ Investment Holding Co (遠雄自貿港投資控股) and connector supplier Hu Lane Associate Inc (胡連精密).

MSCI removed 11 Taiwanese stocks from the MSCI Global Small Cap indices, including e-commerce service provider 91APP Inc, flat panel display maker Amtran Technology Co (瑞軒科技), First Copper Technology Co (第一伸銅科技) , high-speed IC interface designer Genesys Logic Inc (創惟科技), biotech company PharmaEngine Inc (智擎生技), and Taiwan Business Bank.

MSCI added two stocks to the MSCI Taiwan index while removing one, bringing the constituent count to 88.

PharmaEssentia saw the biggest weighting increase – 0.37 percentage points – in the MSCI Taiwan index, while contract chipmaker Taiwan Semiconductor Manufacturing Co (台積電) saw the biggest drop of 0.26 points. percentage to 40.44% due to heavy losses amid volatility among tech stocks in global markets. and an aggressive cycle of rate hikes by the US Federal Reserve.

The index adjustments are expected to take effect after the market closes Nov. 30, MSCI said.

MSCI index reviews are performed in February, May, August and November of each year.

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