Global index provider MSCI Inc cut Taiwan’s weighting in its Emerging Markets Index and All-Country Asia ex-Japan Index, but slightly increased the nation’s weighting in the All-Country World Index after a semi-annual review.
MSCI lowered Taiwan’s weighting in the Emerging Markets Index by 0.21 percentage points to 11.13 percent and lowered its weighting in the All-Country Asia ex-Japan Index by 0.25 percentage points to 12.84 percent.
However, it raised the nation’s weighting in the All-Country World Index by 0.02 percentage points to 1.37 percent, MSCI data showed.
Lin Liang-yi (林良一), manager of the Yuanta P-shares MSCI Taiwan ETF Fund, said the downward adjustments resulted from the inclusion of Chinese yuan-denominated A shares in the MSCI global indices.
MSCI late on Monday announced that it was adding 234 China A-shares to its global and regional indices, including the MSCI Emerging Markets Index, which is closely followed by foreign institutional investors when investing in emerging markets.
After the inclusion, China’s weighting in the MSCI Emerging Markets Index rose by 1.34 percentage points, the biggest rise among the nations in the index.
South Korea was also affected by the inclusion of Chinese A-shares in the MSCI global indices, as its weighting in the MSCI Emerging Markets Index was cut by 0.35 percentage points, the steepest decline among the nations in the index, Lin said.
Regardless, Taiwan’s economic fundamentals remain sound and should continue to attract foreign funds, Lin added.
The inclusion of Chinese A-shares in MSCI indices could lead foreign investors to pour more funds into the Chinese market in the short term, but its effects on Taiwan’s market would be limited in the longer term, Lin said.
In addition, the global index provider included Taiwan-based passive electronics component maker Walsin Technology Corp (華新科技) in the MSCI Global Standard Indices after the latest review, while removing the stock from the MSCI Global Small Cap Indices.
JPMorgan Asset Management Taiwan said the move increased Walsin Technology’s weighting in MSCI indices by 0.433 percentage points, the highest among the 20 Taiwanese stocks that benefited from a weighting increase.
Formosa Chemicals & Fibre Corp (台灣化學纖維) came in second after its weighting was raised by 0.325 percentage points, ahead of iPhone assembler Hon Hai Precision Industry (鴻海), Formosa Plastics Corp (台塑) and Nan Ya Plastics Corp (南亞塑膠), power management solution provider Delta Electronics Inc (台達電) and First Financial Holding Co (第一金控), JPMorgan said.
MSCI also lowered the weighting of 13 Taiwanese stocks, including Asia Pacific Telecom Co (亞太電信), Formosa Petrochemical Corp (台塑石化) and Standard Foods Corp (佳格食品), JPMorgan added.
Asia Pacific Telecom was removed from the MSCI Global Standard Indices, but added to the MSCI Global Small Cap Indices.
The index adjustments are scheduled to take effect after the market closes on May 31, MSCI said.
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