MSCI’s likely inclusion of Chinese mainland-listed shares in its main emerging index will have limited impact on the Korean stock market in terms of foreign capital exodus, an analyst said Wednesday.
In early June, the index provider is scheduled to make a decision on including 5 percent of China’s A-shares in its emerging equity benchmark, after discussions with investors, MSCI said earlier in March.
The inclusion could bring a bigger proportion of global capital into Chinese shares from passive funds.
“If Chinese A-shares are included, about 1 trillion won ($875 million) foreign capital is expected to flee from the Korean stock market because the country’s proportion in the MSCI emerging index will likely fall by 0.3 percent points to 14.9 percent,” said Kim Young-hwan, an analyst at Shinhan Investment Corp.
He based his forecast on estimates that the MSCI emerging index is set for $1.7 trillion in investor assets globally of which $300 billion are passive funds.
“But such foreign capital exodus will not be large enough to shake the Korean stock market,” Kim said.
To have a meaningful impact, the foreign capital outflow should be at least 4 trillion won in a month, based on analysis of the movements of the foreign capital in the Korean stock market for the past five years, he added.
By Kim Yoon-mi (yoonmi@heraldcorp.com)