SK Telecom removed from MSCI index

MSCI logo [REUTERS]

SK Telecom was removed from the Morgan Stanley Capital International (MSCI) ACWI index in the investment research firm's August quarterly review released Friday. Kakao Pay failed to make it to the index.

ACWI, which stands for All Country World Index, is the New York-based MSCI's benchmark index widely tracked by fund managers. Thirteen companies were newly added to the list and eight were removed in the August review, including Korea’s largest telco.

SK Telecom share price dipped 1.3 percent on the Kospi bourse on Friday to 51,900 won ($39.90), following the announcement.

The company was excluded from the index due to the increase in foreign ownership. MSCI limits the maximum proportion of shares available to foreign investors, which it refers to as “foreign room,” to around 47 percent. Foreign investors owned 48.1 percent of SK Telecom on Thursday.

“In the wake of SK Telecom's exclusion from the index, about 100 billion won of net outflow is estimated for the company, from the passive capital following the MSCI benchmark,” said Kim Dong-young, analyst at Samsung Securities.

SK Telecom will be eligible for inclusion after a year from now.

Kakao Pay’s stock is also trading lower, down 3.2 percent to 72,600 won. On the previous day, its share price had jumped 6.23 percent on the expectation of possible inclusion.

The mobile payment service could not join the index in the August review as it failed to meet the market capitalization standard. Analysts estimate that over 2.2 trillion won of the float-adjusted market cap is required for inclusion. Float-adjusted market cap is calculated by multiplying the number of floating shares — shares available to the investor in the public market — by the stock price.

Though many analysts were largely expecting the decision, Alipay Singapore Holding Pte — the second largest shareholder of Kakao Pay — selling 5 million shares of the company in June was considered a possible variable for the result.

Alipay dumped 3.8 percent of Kakao Pay's total issued shares in a block deal, pushing up the number of its floating shares.

“As expected, Kakao Pay was not included in the MSCI index in the August quarterly review,” said Kim, “but since it was because the quarterly review has a stricter screening standard, the company has a higher possibility for inclusion in the semi-annual review in November.”

MSCI releases its quarterly review in February, May, August and November every year.

The changes will take effect after the market close on Aug. 31.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]