Taiwan seen an Asian winner in new MSCI indices
TAIPEI, May 15 (Reuters) - Taiwan's stock market is
expected to benefit when MSCI unveils a new standard for
inclusion in its indices this weekend, but weightings for some
large-cap stocks could be cut in favour of smaller more easily
traded companies.
On Saturday, index compiler Morgan Stanley Capital
International (MSCI) will reveal constituents of its
Provisional Index series, which adopts a "free-float"
methodology emphasising companies whose shares are available
for trading, rather than those that are closely held.
Asian markets dominated by state firms, family-owned
enterprises and tightly-held members of corporate conglomerates
are expected to decrease in weighting compared to counterparts
in Europe or North America.
But Taiwan, where individual investors held 55.37 percent
of all shares last year, is seen claiming ground from most
other Asian markets in the MSCI indices, which are used as a
benchmark by fund managers for billions of dollars in
investment funds.
"The general thinking is that Taiwan's weighting in the
world index declines negligibly, and its weighting in the
regional and emerging markets indices increases," said Neal
Stovicek, head of Research at National Securities based in
Taiwan.
"Taiwan is seen as a winner," he said.
Credit Suisse First Boston estimated that Taiwan's
inclusion weight in MSCI's Far East ex-Japan would rise to 22.3
percent from 19.3 percent. Other estimates go to as high as 30
percent.
WINNERS AND LOSERS
Analysts say the new Taiwan Index is expected to introduce
as many as 12 new companies into its roster and drop several
firms, as well as shake up weightings of existing MSCI index
constituents.
Taiwan Semiconductor Manufacturing Co (TSMC) <2330.TW>
<TSM.N>, Taiwan's heaviest heavyweight commands just over 10
percent of total market capitalisation and could slip to 20
percent weighting from its current 21 percent, according to
Salomon Smith Barney estimates.
TSMC is 12 percent owned by a Taiwan government investment
fund and 30 percent by Philips Electronics <PHG.AS>.
By contrast, TSMC's archrival in the contract chipmaking
business, United Microelectronics <2303.TW> <UMC.N>, is
expected to rise by two percentage points to 13.6 percent
weighting.
UMC is the market's third largest company in terms of
capitalisation with just under 10 percent of total market
capitalisation.
While Chunghwa Telecom <2412.TW> is expected to debut on
the provisional index, its weighting was seen at just 0.5
percent despite holding the second-largest market
capitalisation behind TSMC.
That's because the state-controlled company sold only three
percent of its shares in an disappointing domestic stock
offering. The government still owns the remaining 97 percent of
the telecom giant.
"Free float is very much going to work against it," said
Jeffrey Hanson, head of research at CSFB. "I still think it's
going to be included, but probably at a very low weighting."
Microchip designer VIA Technologies <2388.TW> is also
widely expected to make the new list.
The company is Taiwan's tenth largest big-cap, but not
represented on the existing MSCI index. The new index aims to
expand coverage to 85 percent of the target market's total
capitalisation instead of the current 60 percent.
"INVESTABILITY" IN FOCUS
MSCI is giving fund managers ample time to digest the new
methodology, which will be phased into its standard indices in
two steps starting in November this year and ending in May
2002.
The new list of stocks to be announced on Saturday will
also include an "investability factor" for Taiwan, which will
take goverment capital controls into account.
Taiwan is currently weighted at just 80 percent of its
market capitalisation in MSCI indices due to investment
restrictions, such as the lengthy approval process for
qualified foreign institutional investors.
MSCI is also scheduled to announce its quarterly
rebalancing of its standard index on May 17. |
