By Patrick Rial and Reinie Booysen
May 14 (Bloomberg) -- MSCI Inc. boosted the number of Taiwanese companies in its indexes, while Argentina’s equities were downgraded following a semi-annual review. Maxim Integrated Products Inc. is among the three largest additions to the MSCI World Index.
The MSCI Taiwan Index will see 22 companies added and one deleted. The additions will result in $687 million in capital inflows to Taiwan, according to estimates by Merrill Lynch & Co., the most of any country. Argentina was downgraded from the Emerging Markets Indices to the Frontier Markets Index.
“The only real surprise was the magnitude of changes and additions for Taiwan,” said Chris Lobello, a risk and trading strategist at CLSA Ltd. Argentina’s cut is “a message from MSCI that the trading environment is just too difficult.”
Taiwan’s Taiex index has soared 39 percent this year, the second-best performance in Asia behind China, on optimism improved relations between the two countries will boost investments.
MSCI’s changes may trigger $687 million of inflows from fund managers who use the indexes, according to Merrill Lynch & Co. estimates. The Merval Index has climbed 35 percent in Argentina this year, following a 50 percent slide in 2008 after the South American nation’s government nationalized pension funds with stock investments.
Weight Increase
The weighting of Taiwan stocks in the MSCI Asia ex-Japan Index will likely rise to 17.9 percent from 16.9 percent, Lobello wrote in a report. He said stocks getting added to the benchmarks typically rise in the period up to the change and fall afterward.
U.S. companies Maxim, Crown Holdings Inc. and Myriad Genetics Inc. will be the three largest additions in the MSCI World, a dollar-based, free-float market weighted benchmark of stocks in 23 developed nations, MSCI said in a statement dated yesterday. The changes will occur after the May 29 close.
Maxim, a maker of microchips for laptop computers, has climbed 19 percent this year, outpacing a 2.1 percent decline by the Standard & Poor’s 500 Index. Aluminum can producer Crown has added 18 percent, while cancer test-maker Myriad lost 0.7 percent.
Global Contraction
The gauge has slumped 40 percent in the past year amid what the International Monetary Fund is predicting to be the first contraction in global growth since the end of World War II.
MSCI provides a variety of indexes divided into countries, industry groups, value metrics and other categories. The company estimates more than $3 trillion in funds are benchmarked against their indexes globally.
Changes to the MSCI indexes can cause shares that are chosen for inclusion to advance and those slated for deletion to drop as passively managed funds designed to mirror the benchmarks buy and sell stocks in accordance with those changes.
Hong Kong-listed Kingboard Chemical Holdings Ltd. and Renhe Commercial Holdings Co. and South Korea’s NCSoft Corp. are the three largest inclusions to the MSCI Emerging Markets Index.
Wintek Corp., a supplier of flat-panel displays for Apple Inc., and Farglory Land Development Co., Taiwan’s largest developer, both rose by their daily limit of 6.9 percent in Taipei after being added to MSCI’s indexes. Argentina’s Banco Macro SA, which appointed a government director to its board in April, climbed 38 percent this month prior to the announcement it will be deleted from MSCI’s gauges.
Trinidad and Tobago was added to the Frontier Markets Index.
Noble Energy Inc., TD Ameritrade Holding Corp. and Autozone Inc. were the biggest additions to the MSCI U.S. Large Cap 300 Index.
To contact the reporters on this story: Reinie Booysen at rbooysen@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.
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