Taiwan’s weightings in two indices managed by MSCI Inc have been cut after a semiannual review by the global index provider.
In a statement released overnight, MSCI said that it has lowered Taiwan’s weighting in the MSCI Emerging Markets Index to 11.63 percent from 11.88 percent and has cut the nation’s weighting in the MSCI All-Country Asia ex-Japan Index to 13.66 percent from 14.02 percent.
It is the 11th consecutive quarter in which MSCI has lowered Taiwan’s weighting in the MSCI Emerging Markets Index.
Photo: CNA
However, MSCI has left Taiwan’s weighting in the MSCI All-Country World Index unchanged at 1.21 percent.
Since the MSCI indices are closely followed by foreign institutional investors when they map out their investment strategies in emerging markets, the weighting cut in the MSCI Emerging Markets Index could lead foreign investors to move funds out of the local stock market, analysts said.
“The cuts in the MSCI indices are expected to prompt foreign institutional investors to move funds out of Taiwan, the last thing investors here want to see,” Hua Nan Securities Co (華南永昌證券) analyst Henry Miao (苗台生) said. “It was no surprise that investors seized on the MSCI move to send shares lower today [Friday] and selling came largely from foreign investors.”
The TAIEX fell 0.67 percent to close at 8,053.69 points yesterday.
Foreign institutional investors sold a net NT$14.09 billion (US$431.9 million) of shares on the local bourse yesterday, Taiwan Stock Exchange data showed.
In terms of individual stocks, contract chip maker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock on the TAIEX, and Hon Hai Precision Industry Co (鴻海精密), an assembler of iPhones and iPads for Apple Inc, suffered the steepest weighting cut of 0.26 percentage points under the latest MSCI review.
TSMC shares fell 1.37 percent to close at a three-month low of NT$144 after the weighting cut, while those of Hon Hai gained 1.5 percent to NT$74.4 as investors paid attention to a proposal in which the world’s largest contract electronics maker is to pay a NT$5 dividend.
However, Nien Made Enterprise Co (億豐綜合工業), a curtain maker, saw its weighting rise 0.28 percentage points, the largest upgrade by MSCI. Nien Made shares fell 1.49 percent to close at NT$264 after investors locked in earlier gains following from the weighting adjustment.
MSCI also added DRAM maker Nanya Technology Corp (南亞科技) and biotech firm TaiMed Biologics Inc (中裕新藥) to its global standard indices. Nanya shares rose 5 percent to close at NT$39.9, while TaiMed shares gained 5.72 percent to close at NT$212.5.
Yuanta P-shares MSCI Taiwan ETF Fund manager Betty Chen (陳思蓓) said the economy has continued to slow down, with local manufacturing activity weakening, and under such unfavorable circumstances the domestic equity market has been in the doldrums.
Chen said that before the latest MSCI announcement, the market had widely anticipated the weighting cuts, prompting foreign institutional investors to shift to the sell side and register a net sale of more than NT$70 billion of shares in the spot market so far this month.
Meanwhile, China’s weighting in the MSCI Emerging Markets Index has been raised by 2.4 percentage points to 26.49 percent, the highest increase among emerging markets, while South Korea’s weighting in the same index has been cut by 0.77 percentage points, the steepest cut.
The latest index adjustments are scheduled to take effect after the close of trading on May 31.
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