MSCI reshuffle heralds new rise of conventional industries

By Ted Chen, The China Post

TAIPEI, Taiwan — The MSCI is poised to announce finalized adjustments to its Taiwan Index early this morning, with reports indicating that five conventional industry companies will be named for inclusion.

Reports listed five companies, Wei-Chuan Foods Corporation (味全), textile companies Eclat (儒鴻), and Makalot (聚陽), tire maker Kenda (建大), and China Steel Chemical Corporation (中碳), which may see inclusion in MSCI’s Taiwan Index. The move marks a departure from precedents, where Taiwan’s list of leading companies are conventionally dominated by the technology sector.

Shares of the five companies listed have seen heavy buying from foreign institutional investors. Most notably, since May 1, shares of Wei-Chuan saw a 20-percent surge, propelled by intake exceeding 100 million shares from foreign institutional investors.

The MSCI Taiwan Index is a free-floating adjusted market capitalization weighted index that monitors the performance of securities listed on the Taiwan Stock Exchange and the over-the-counter GreTai Securities Market. It is also an indicator cited by foreign institutional investors in deciding portfolio weighting of Taiwanese securities.

Reports also indicate that MSCI is poised to increase the weighting of securities listed in the Taiwan markets relative to other markets in Asia.

Throughout yesterday’s session shares of the five companies saw intraday surges, as investors scrambled to take position in anticipation of gains. Brokerage firms urge the public to utilize the high leverage attributes of warrants to capitalize on anticipated gains.