Korean bio stocks removed in mass in Kosdaq 150 Index adjustment

2019.11.28 13:45:14 | 2019.11.28 13:45:42

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Battered pharmaceutical and biotechnology stocks were pushed out of the Kosdaq150 index, which made the biggest year-end realignment to date, dealing another blow to Korean bio names after removal from the MSCI Index.

Korea Exchange (KRX) announced that it was replacing 17 stocks on the secondary Kosdaq index following top 150 stocks.

Among the outgoing names, seven were pharmaceutical and biotech stocks including Microgen, Binex, Dae Wha Pharm, JW Shinyak and Bio Solution and three cosmetic firms. They were replaced by semiconductor and telecom related stocks such as Kuk-il Paper, Nepes, SFA Semicon, MCNEX and Seojin System, and data and fintech firms such as SaraminHR, NHN KCP and Echomarketing were newly added.

The adjustment was in line with the global trend where local bio stocks are being shunned by global reference indices while interest in chip and telecom shares is growing following the launch of 5G network this year. At the semiannual adjustment of the MCSI Index, a benchmark created by Morgan Stanley Capital International to track equity market performance in emerging markets, Korean bio stocks including Celltrion Pharm, Shilla Jen and Hanmi Science were out while 5G equipment company KMW was newly included.

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The result was somewhat expected after a number of Korean biotech and pharmaceutical companies reported hiccups in clinical trials for their promising novel drugs or biosimilars.

Kosdaq shares are largely swayed by changes in the Kosdaq150 index because the index is a reference index actively tracked by passive funds through exchange-traded funds (ETFs). Most of the stocks excluded from the index this time already saw their prices fall faster than 2.2 percent, the average volatility rate in the entire Kosdaq market this month.

More biotech stocks are likely to be excluded from the Kosdaq150 if the KRX changes the index configuration method starting next year amid growing criticism that the index is weighted too heavily on biotech stocks. As of Nov. 27, there were 46 biotech stocks in the Kosdaq150 index, accounting for 32.7 percent its total market cap, while their market value in the entire Kosdaq market was just 24.4 percent.

By Park In-hye and Choi Mira

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