MSCI cuts Taiwan’s weighting in 2 indexes, raises it in another

Taipei, Global index provider MSCI Inc. has cut Taiwan's weighting in its Emerging Markets Index and the All-Country Asia ex-Japan Index while increasing its weighting in the All-Country World Index after a semi-annual index review.

According to data compiled by Yuanta Securities Investment Trust Co., MSCI has lowered Taiwan's weighting in the Emerging Markets Index by 0.21 percentage points to 11.13 percent and lowered the country's weighting in the All-Country Asia ex-Japan Index by 0.25 percentage points to 12.84 percent.

It raised Taiwan's weighting in the All-Country World Index by 0.02 percentage points to 1.37 percent, the data showed.

Lin Liang-yi (???), manager of the Yuanta P-shares MSCI Taiwan ETF Fund, said the lowering of Taiwan's weighting in the two MSCI indexes resulted from the inclusion of Chinese yuan-denominated A shares in China in the MSCI global indexes.

MSCI announced overnight that it was adding 234 China A shares to its relevant global and regional indexes, including the MSCI Emerging Markets Index, which is closely followed by foreign institutional investors when investing in emerging markets.

After the inclusion, China's weighting in the MSCI Emerging Markets Index has been increased by 1.34 percentage points, the biggest rise among the countries in the index, according to Lin.

South Korea was also affected by the inclusion of China's A shares in the MSCI global indexes, as its weighting in the MSCI Emerging Markets Index was cut by 0.35 percentage points, the steepest decline among the countries in the index, Lin said.

Despite the cut in Taiwan's weighting in the two MSCI indexes, the economic fundamentals of the country remain sound and should continue to attract foreign funds, Lin said.

Lin said the inclusion of Chinese A shares in MSCI indexes could lead foreign investors to put more of their funds into the Chinese market in the short term, but he believed the impact on Taiwan's market will be limited in the longer term.

In other moves, the global index provider included Taiwan-based passive electronics component maker Walsin Technology Corp. to the MSCI Global Standard Indexes after the index review, while removing the stock from the MSCI Global Small Cap Indexes.

J.P. Morgan Asset Management said the move increased Walsin Technology's weighting in the MSCI indexes by 0.433 percentage points, the highest among the 20 Taiwanese stocks which benefited from a weighting increase.

Formosa Chemicals & Fibre Corp. came in second after its weighting was increased by 0.325 percentage points, ahead of iPhone assembler Hon Hai Precision Industry Co. (0.269 percentage point rise), Formosa Plastics Corp. and Nan Ya Plastics Corp (0.142 percentage point rise), power management solution provider Delta Electronics Inc. (0.058 percentage point rise), and First Financial Holding Co. (0.049 percentage point rise), J.P. Morgan said.

MSCI also lowered the weighting of another 13 Taiwanese stocks, including Asia Pacific Telecom Co. by 0.099 percentage points, the steepest cut, followed by Formosa Petrochemical Corp. by 0.078 percentage points and Standard Foods Corp. by 0.064 percentage points, J.P. Morgan added.

Asia Pacific Telecom was removed from the MSCI Global Standard Indexes but added to the MSCI Global Small Cap Indexes.

The index adjustments are scheduled to take effect after the market closes on May 31, MSCI said.

Source: Focus Taiwan News Channel