The Korea Exchange announced the results of its new industrial classification system, implemented in September.
On September 22, the exchange established the KRX Industrial Classification System (KRICS) to better manage the classification and positioning of listed companies according to the domestic industrial environment and to effectively respond to the demand for various index developments.
Critics noted that the existing Global Industry Classification Standard (GICS) inadequately reflected the characteristics of the domestic market, such as including automobiles and auto parts under consumer goods and not categorizing the battery industry separately.
In response, the exchange created a new mobility sector that combines automobiles and parts with passenger transport, while also classifying key domestic industries like shipbuilding, batteries, semiconductors, and displays separately to enhance comparability.
A total of 2,559 listed companies were assigned to four levels of classification: sector, industry group, industry, and sub-industry, resulting in some companies being reassigned to different sectors.
SK and LG were reclassified from industrial goods to information technology, while Hyundai Motor and Kia were moved to the mobility sector. Samsung Electronics and SK Hynix were categorized under semiconductors within the information technology sector, and LG Energy Solution was classified under batteries within industrial goods.
According to Yonhap News, Yoon Jae-hong, a researcher at Mirae Asset, stated that a total of 63 indices, including KOSPI 200 and KOSDAQ 150, will be directly or indirectly affected by the changes in the industrial classification system, with approximately 88.1 trillion won in ETF assets tracking these indices.
He added, "The changes in the industrial classification system have led to an increase in the expected number of stocks compared to the previous regular changes, where there were four stocks added and removed each."
According to the Mirae Asset Research Center, the upcoming December regular changes for KOSPI 200 are expected to include 10 stocks, such as Daeduck Electronics and Iljin Electric, while 11 stocks, including Asia and SeAH Steel Holdings, are anticipated to be removed. The KOSDAQ 150 is also expected to see 10 stocks added and removed.
The December regular changes will be based on the average market capitalization and trading volume from May 1 to 30, the review period.
When the composition of index stocks changes, ETFs and index funds tracking those indices must adjust their holdings and proportions accordingly. This could lead to increased buying pressure on newly added stocks and selling pressure on those being removed.
However, the actual impact on supply and demand and stock price movements may vary depending on the final list of included stocks, their weight within the index, and market conditions, so caution is advised regarding short-term volatility.
* This article has been translated by AI.
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