MSCI Inc’s plan to reduce Taiwan’s weighting in two of its major indices might lead to a fund outflow of US$212 million from the nation, the Financial Supervisory Commission (FSC) said.
That would be about 0.02 percent of the NT$2.41 trillion (US$86,5 billion) in market capitalization owned by foreign institutional investors, the commission said, adding that no significant effect on local firms is expected.
The global index provider on Thursday announced that it would later this month lower Taiwan’s weighting in its MSCI Emerging Markets Index, which is closely watched by foreign institutional investors, to 14.21 percent, a drop of 0.09 percentage points.
It is the 10th consecutive quarter that MSCI is to lower Taiwan’s weighting in the index.
Based on its quarterly index review, MSCI would raise China’s weighting by 0.41 percentage points, the steepest increase.
South Korea’s weighting would be lowered by 0.11 percentage points, the steepest decline.
In its MSCI All-Country Asia ex-Japan Index, the index provider would cut Taiwan’s weighting by 0.16 percentage points to 16.15 percent.
Taiwan’s weighting in the MSCI All-Country World Index would remain unchanged at 1.78 percent.
The adjustments are scheduled to take effect after markets close on Aug. 31, the index provider said.
Meanwhile, MSCI said it would add Momo.com Inc (富邦媒體), one of Taiwan’s leading e-commerce operators, to its MSCI Global Standard Indexes, while removing Taiwan Business Bank (台灣企銀) from the indexes.
Taiwan Business Bank would be added to the MSCI Global Small Cap Indexes, it said.
The addition of Momo.com and the removal of Taiwan Business Bank reflect fluctuations in the companies’ reports in the past few quarters, market analysts said, calling MSCI’s adjustments this quarter “minor.”
No companies would be added to or removed from the MSCI Taiwan Index, while the weighting of 17 out of 87 firms on the index would be adjusted.
Momo.com’s weighting would be upgraded by 0.22 percentage points, the steepest increase, while Taiwan Business Bank’s weighting would be downgraded by 0.16 percentage points, the steepest decline.
Securities and Futures Bureau Deputy Director-General Tsai Li-ling (蔡麗玲) said the performance of Taiwan’s equity market reflects the nation’s economic and corporate fundamentals.
MSCI’s adjustments would have no effect on share prices in the local market, she added.
Taiwan’s equity market remains competitive thanks to its sound fundamentals, transparency and healthy legal mechanism to attract foreign institutional investors, Tsai said.
MSCI conducts four annual index reviews — in February, May, August and November.
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