Impact of MSCI Taiwan index weighting cuts minimal: analyst

05/14/2022 04:08 PM
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Taipei, May 14 (CNA) The latest cut in Taiwan's weighting in part of global index provider MSCI Inc's major indexes has had minimal impact on the local equity market as investors pay more attention to the country's fundamentals, according to an analyst.

Despite the decision by MSCI to lower Taiwan's weighting in two of its major indexes early Friday morning (Taiwan time), the weighted index (Taiex) on the Taiwan Stock Exchange (TWSE) soared 215.86 points, or 1.38 percent to end at 15,832.54 on a technical rebound that day, following a 2.43 percent slump the previous session.

Based on the performance of the Taiex on Friday, Yeh Hsien-wen (葉獻文), vice president of PGIM's High Growth Fund, said many investors did not respond to MSCI's cut in Taiwan's weighting, with economic fundamentals, enterprise profitability and market sentiment in focus.

MSCI announced its decision to cut Taiwan's weighting on the MSCI Emerging Markets Index, which is closely watched by foreign institutional investors, by 0.11 percentage points to 15.56 percent and lower the country's weighting on the MSCI All-Country Asia ex-Japan Index by 0.11 percentage points to 17.9 percent after its latest index review.

It was the 13th consecutive time Taiwan's weighting has been cut on the two indexes.

However, MSCI also decided to raise Taiwan's weighting on the MSCI All-Country World Index by 0.01 percentage points to 1.71 percent.

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

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

In the latest index adjustments, China enjoyed the highest increase in its weighting on the MSCI Emerging Markets Index by 0.32 percentage points, followed by Indonesia, which saw an increase of 0.03 percentage points, while India suffered the steepest weighting cut of 0.17 percentage points.

Taiwanese companies added to, removed from MSCI indexes

In addition, MSCI has added China Airlines (CAL), EVA Airways, contract chipmaker Powerchip Semiconductor Manufacturing Corp. and wire and cable supplier Walsin Lihwa Corp. to its Global Standard Indexes. Market analysts said the inclusion demonstrates recent gains made by these stocks.

However, MSCI removed metal casing supplier Foxconn Technology Co., which is an affiliate of iPhone assembler Hon Hai Precision Industry Co., machinery brand Hiwin Technologies Corp. and drug developer Oneness Biotech Co. from its Global Standard Indexes.

While CAL, EVA Air, Powerchip Semiconductor and Walsin Lihwa, along with three others, have been removed from the MSCI Global Small Cap index, Foxconn Technology Co., Hiwin Technologies, and Oneness have been included on the MSCI Global Small Cap index.

An additional 14 Taiwanese stocks, including Evergreen Steel Corp., Lian Hwa Foods Corp., Great Tree Pharmacy Co. and semiconductor supplier Etron Technology, Inc., were also added to the MSCI Global Small Cap index.

After the index review, the number of companies on the MSCI Taiwan Index rose from 86 to 87, with Powerchip Semiconductor enjoying the largest increase of 0.42 percentage points in weighting and Hiwin seeing the steepest weighting cut of 0.19 percentage points.

Allianz Global Investors said inflation and adjustments in monetary policy by the U.S. Federal Reserve are expected to continue to dictate the local stock market's movement in the near term.

(By Han Ting-ting, Jeffrey Wu and Frances Huang)

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