Global index provider MSCI Inc yesterday lowered Taiwan’s weighting in its two major indices after its latest review, which might prompt an outflow of US$200 million in funds next quarter, the Financial Supervisory Commission (FSC) said yesterday.
The index provider trimmed Taiwan’s weighting in the MSCI Emerging Markets Index — which covers more than 800 securities across the large and mid-cap segments in 26 emerging markets — by nine basis points to 12.45 percent, commission data showed.
However, Taiwan’s weighting in the index remained in second place, only after China’s weighting of more than 40 percent, the data showed.
The company also slashed Taiwan’s weighting in the MSCI AC Asia Pacific ex-Japan Index — which captures large and mid-cap representation across four developed markets and nine emerging markets in the Asia-Pacific region — by four basis points to 14.09 percent, the data showed.
MSCI Inc kept Taiwan’s weighting in the MSCI ACWI Index, MSCI’s flagship global equity index, unchanged at 1.56 percent, the data showed.
It was the sixth consecutive review in which MSCI cut Taiwan’s weighting in the MSCI Emerging Markets Index and the MSCI All-Country Asia ex-Japan Index, the data showed.
The latest adjustment is to take effect after markets close on Sep. 1, MSCI said.
“It seemed that MSCI reduced Taiwan’s weighting as the company raised China’s and Russia’s weightings in the two indices,” Securities and Futures Bureau Chief Secretary Kao Ching-ping (高晶萍) told a news conference in New Taipei City.
As the indices are closely watched by foreign institutional investors when shaping their strategies for investing in equities and tracked by exchange-traded funds, the reduction in Taiwan’s weighting is predicted to lead to a fund outflow of US$200 million, Kao said.
It should not pose any concern for the local capital market, given that the outflow of US$200 million only accounts for 0.04 percent of total investments by foreign investors, Kao said.
Despite the decline in Taiwan’ weighting, the TAIEX yesterday gained 0.73 percent to 12,763.13 points in Taipei trading, with turnover totaling NT$236.24 billion (US$8 billion), Taiwan Stock Exchange data showed.
Separately yesterday, the FSC approved an application from Deutsche Securities Asia Ltd’s Taipei branch (德意志證券亞洲有限公司台北分公司) to terminate its local operations, with the company’s last business day scheduled to be Monday next week, Kao said.
The company’s decision came after its headquarter last year announced that it would exit the global equities business as part of a sweeping restructuring plan to improve profitability, the commission said.
The branch’s closure would not affect the local securities and futures industry, as it only had a market share of 0.18 percent in the securities business and 0.12 percent in the futures business, Kao said.
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