20160426-三星证券-Kospi_200_reconstitution_Float_and_stock_changes_equally_important_13页_1mb

Kospi 200 Reconstitution and Free-Float Ratio Adjustments Summary

Core Content

The document discusses the projected changes for the Kospi 200 index in 2016, including the reconstitution of index components and adjustments to free-float ratios. It outlines the expected number of stock replacements, the criteria for selection, the impact of these changes on market capitalization-based index weighting, and the potential market impact due to the rebalancing of index funds.

Main Points

• Reconstitution Overview:

  • The Kospi 200 is reconstituted annually on the first business day after the June index futures expiration date.
  • The reconstitution aims to reflect changes in industry landscapes and company rankings.
  • The KRX typically announces the results of reconstitution over end-May into early June.

• Stock Changes:

  • 10-12 stocks are expected to be replaced, including 2 services stocks (Hanmi Science and BGF Retail) and 8-10 manufacturers.
  • Chosun Refractories and Motonic may be removed if liquidity rules are strictly followed.
  • Cuckoo Electronics and Mando are likely to replace some existing manufacturers.

• Free-Float Ratio Adjustments:

  • 15 stocks are expected to have free-float ratio adjustments, with 6 cuts and 9 increases.
  • Adjustments are primarily due to share buybacks, changes in stakes held by large shareholders, and selling of treasury stock.
  • Free-float ratios are rounded up to the nearest 5%, and stocks with a free-float ratio below 10% are excluded.

• Market Impact:

  • The reconstitution is expected to involve KRW30t-35t of funds for rebalancing.
  • The market impact is anticipated to be limited, as the rebalancing demand for added stocks should largely offset that for removed stocks.
  • The addition of new stocks may slightly reduce the market cap-based weighting of existing large caps.

Key Information

Industry-Specific Changes

Free-Float Ratio Adjustments

Free-Float Adjustments and Market Impact

Impact on Market Cap-Based Index Weighting

Additional Notes

• Hotel Lotte is expected to be added to the index if it completes its IPO by mid-August and maintains a market cap of at least 1% of the Kospi for 15 days.
• Dongsuh may move from Kosdaq to Kospi, but it is unlikely due to progress on re-listing.
• Taihan Electronic Wire is unlikely to be added to the index due to its low liquidity and suspended trading.
• The KRX is advised to consider quarterly or semiannual free-float adjustments to reduce tracking errors in index funds.