By Ruby Ying, The China Post
Morgan Stanley Capital International (MSCI), among the world’s most influential compiler of share indexes for investors, unveiled last Saturday a new method of market weighting, which will include an extra 33 Taiwan stocks into the calculation of its MSCI Provisional Index Series. Taiwan shares will see their weighting for the MSCI Emerging Markets Free Index increase to 0.73 percent, a move viewed by most institutional investors as a boost to the Taiwan stock market.
The weighting of Taiwan shares for the MSCI All Country World Index (ACWI) under the new system, however, is estimated to drop by 0.24 percent to 0.44 percent.
Among the 33 new Taiwan stocks to be included in the Provisional Index Series are VIA Technologies, Micronix International, and Compeq Manufacturing. While incorporating the 33 new stocks, MSCI eliminates five stocks and retains 58 stocks.
Under the new system, the open markets in the U.S. and Europe that make up the main bulk of the index would gain even more weight overall, advancing 1.9 points to 96.9 percent from 95 percent of the total, while emerging markets would fall to 3.1 percent from five percent. Taiwan is one of the few emerging markets to see its weighting increase under the new system. According to the MSCI, the emerging markets whose shares are set to increase are South Africa (4.33 points), South Korea (3.27 points), mainland China (1.65 points), Taiwan (0.73 points), and Israel (0.59 points). The MSCI Index Series has been created based on the MSCI enhanced methodology for free float adjustment of constituents’ index weights. The index, which takes into account around 50 developed and emerging markets, is closely followed by investment funds as market benchmark for their decisions.
The new methodology and provisional index series will become effective in May.