Global index provider MSCI Inc has lowered Taiwan’s weighting in two of its major indices, but upgraded it in another after a quarterly review on Wednesday.
The move is expected to cause a fund outflow of US$56 million from the nation, the Financial Supervisory Commission (FSC) said yesterday.
As the estimated outflow is about 0.006 percent of market capitalization owned by foreign institutional investors, it is not expected to affect the local bourse, the commission said, adding that local equities are still subject to international developments and the nation’s economic fundamentals.
Photo: Reuters
However, the market might encounter bigger volatility at the end of the last trading session before the date that MSCI’s downgrade takes effect, as most passive investment funds take the closing price as the principle of trading to reduce tracking errors, the Taiwan Stock Exchange said in a statement yesterday.
In a statement, MSCI said that its latest adjustments are to take effect after markets close on Feb. 25.
The latest review saw MSCI lower Taiwan’s weighting in its MSCI Emerging Markets Index, which is closely watched by foreign institutional investors, to 16.37 percent, a drop of 0.02 percentage points.
MSCI also cut Taiwan’s weighting in the MSCI All-Country Asia ex-Japan Index from 18.70 percent to 18.56 percent, while raising its weighting in the MSCI All-Country World Index from 1.90 percent to 1.91 percent.
MSCI also said it would add E Ink Holdings Inc (元太科技), a supplier of e-paper displays, to its MSCI Global Standard Indexes, while removing contract electronics maker Wistron Corp (緯創).
Wistron would be added to the MSCI Global Small Cap Indexes, it said.
Taiwanese shares continued to rise for a fourth consecutive session yesterday, despite the news of MSCI’s index review, as most institutional investors maintained a buying spree, lifting the TAIEX by 186.29 points, or 1.03 percent, to close at the session high of 18,338.05.
Foreign institutional investors yesterday bought a net NT$9.7 billion of shares and domestic investment trust companies bought a net NT$918 million, while domestic proprietary traders sold a net NT$1.63 billion, stock exchange data showed.
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