LGES expects more money influx with MSCI index inclusion

LG Energy Solution CEO Kwon Young-soo speaks during the company's listing ceremony held at Korea Exchange (KRX)'s Seoul Building located on Yeouido on Jan. 27, when the firm's shares debuted on the KOSPI. Newsis

By Anna J. Park

As LG Energy Solution (LGES) is slated to be included in two MSCI indexes ― the MSCI Emerging Markets (EM) Index and the MSCI Korea Index ― by mid-February, the global battery maker's stocks are expected to enjoy a massive influx of global passive funds. The world's second-largest secondary battery maker is set to be included in the indexes after closing on Feb. 14, and LGES is expected to take up about 0.11 percent of the MSCI EM Index and 1 percent of the MSCI Korea Index.

Given than about 95 percent of U.S.-based mutual funds track the MSCI index, the company's inclusion in the indexes signals a possible stock price surge. Market analysts estimate that up to 690 billion won ($570 million) worth of global passive funds will flow into the stock.

“It is being calculated that LGES' stock will see an influx of about 690 billion won upon its inclusion in the indexes, considering that some $500 billion worth of global passive money is tracking the MSCI EM,” said Kim Dong-young, a senior analyst at Samsung Securities, adding that the specific figures could be revised according to stock price changes by the inclusion date.

LGES' stock, meanwhile, failed to make a quick entry into the Financial Times Stock Exchange (FTSE) Index. The company's inclusion in this index is scheduled to be discussed during a quarterly review in March.

“LGES' stock's failure to be included early in the FTSE Index is attributed to the shortage of investable market capitalization, which is a criterion,” Heo Yule, an analyst at NH Investment & Securities, pointed out.

Short-selling of LGES shares will be possible starting March 11, when the stock is expected to be included early in the KOSPI 200 Index, a capitalization-weighted index of 200 Korean stocks that makes up 93 percent of the total market value of Korea's stock market. Currently, short-selling is possible only for Korean stocks that are included in the KOSPI 200 and KOSDAQ 150 indexes.

Upon its listing in late January, LGES' stock jumped straight to the second-largest market cap status ― with over 105 trillion won ― on the country's main benchmark KOSPI, behind only Samsung Electronics. The stock ended at 450,000 won on Friday's closing, which is a 50 percent increase from its subscription price of 300,000 won. However, it is more than a 24 percent fall from the initial starting stock price of 597,000 won upon its listing last Thursday.