The MSCI Taiwan Index is compiled by including 85 percent of the market capitalization -- or total dollar value of a company's outstanding shares -- of each industry in the Global Industry Classification Standard.
According to MSCI's Web site, this method of compiling a country index means that the "economic diversity of the market is reflected" in the index.
One would assume that if this were the case, removing the weighting from the Taiwan Index would result in gains for Taiwan's shares, and indeed, Goldman Sachs Group Inc projects that the change will push the TAIEX up 30 percent -- well over the 7,000 point mark -- by next May.
However, Merrill Lynch singled out 15 companies that it predicted would benefit the most from MSCI's move. Among tech stocks, the company believes Taiwan Semiconductor Manufacturing Co (
In the financial services industry, Cathay Financial Holding Corp (
One of the most publicized aspects of MSCI's revision is the fact that Taiwan will become the country with the largest representation in two of MSCI's regional equity indexes: the MSCI Emerging Markets Index and the MSCI All-Country Far East ex-Japan Index. The nation currently ranks third in terms of representation on both of these indexes; behind South Korea and South Africa on the Emerging Markets Index, and behind South Korea and Hong Kong on the Far East Index.
But on May 31, 2005, Taiwan will officially become No. 1, albeit in a rather obscure manner.
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