LG Innotek shares rose following the announcement, trading 3.81 percent higher at 626,000 won ($443) on Thursday morning.
MSCI said LG Innotek will be added to its Korea Standard Index, while HLB, LG Display, POSCO International and Samsung Epis Holdings will be removed. The changes will take effect as of the market close on Aug. 31.
The electronics components maker was already the largest constituent of the MSCI Korea Small Cap Index at the end of July, carrying a 2.43 percent weight.
The MSCI Korea Index measures large- and mid-cap stocks and covers about 85 percent of the Korean equity universe, making inclusion significant for global funds that use MSCI benchmarks to allocate capital.
Benchmark changes can generate mechanical demand from passive funds as they adjust their holdings to match revised index composition. Samsung Securities had estimated before the review that LG Innotek's inclusion could generate about 313 billion won of passive buying.
MSCI reviews its Global Investable Market Indexes four times a year, in February, May, August and November. Its methodology incorporates company and security size, liquidity and foreign investability, with constituent weights adjusted for shares available to investors.
The August reshuffle was broader across Asia. Japan recorded one addition and two deletions, India four additions and three deletions, Taiwan six additions and six deletions, and China 33 additions and 32 deletions, according to MSCI.
AJP Takeaways
- LG Innotek is the sole Korean addition to the MSCI Korea Index in the August review, while four companies will be removed.
- The changes take effect after the Aug. 31 close, when passive funds tracking MSCI benchmarks are expected to rebalance.
- LG Innotek was already MSCI Korea Small Cap's largest constituent, and Samsung Securities had estimated its promotion could trigger about 313 billion won of passive buying.
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