The Korea Exchange has completed the classification of stocks under its new industry classification system, KRICS, revealing significant disparities in market capitalization among different sectors. While the number of companies in the semiconductor and pharmaceutical & bio sectors is similar, their market capitalizations differ by more than tenfold.
According to the financial investment industry on November 1, the Korea Exchange finalized the stock classification adjustments for KRICS on October 30, after gathering feedback from market participants, including asset management firms. This effort aims to reflect the characteristics of the domestic industrial structure and capital markets more accurately.
The revision includes industry groups that reflect major domestic sectors such as 'Semiconductors and Displays,' 'Mobility,' 'Batteries and Electrical Equipment,' and 'Shipbuilding and Vessels.' This allows for a clearer understanding of the scale and influence of each industry within the domestic stock market.
The most notable feature is the overwhelming dominance of the semiconductor industry. The semiconductor and display industry group, which includes Samsung Electronics and SK Hynix, consists of 214 stocks with a market capitalization of 2,486 trillion won, accounting for 50.1% of the total market capitalization of the domestic stock market. In contrast, the pharmaceutical and bio industry group has 231 stocks, but its market capitalization is only 236 trillion won, representing just 4.8% of the total. This means that the market capitalization of the two sectors, despite having a similar number of stocks, differs by 10.5 times.
The consumer discretionary industry group, which includes LG Electronics, Hanjin Kal, and Shinsegae, also has 211 stocks, similar to the semiconductor and display group, but its market capitalization and share are only 93 trillion won and 1.9%, respectively.
The battery industry has also made its presence felt. The battery and electrical equipment industry group has only 110 stocks but boasts a market capitalization of 272.5 trillion won, making it the fourth largest among industry groups, following finance (402 trillion won) and capital goods (303 trillion won). LG Energy Solution and Samsung SDI have market capitalizations of 84 trillion won and 44 trillion won, respectively, indicating their significant weight within the group.
This revision has also led to changes in the industry classification of individual companies. Samsung SDI and Lotte Energy Materials, which were previously classified under the hardware and IT equipment industry of the Global Industry Classification Standard (GICS), have moved to the battery and electrical equipment industry group under KRICS. LG Electronics has also shifted from the information technology sector to the consumer goods sector.
The market is paying close attention to how these changes may impact ETF supply and demand. Adjustments to the composition and weight of sector indices based on industry classification could lead to changes in the portfolios of ETFs that track those indices.
Jang Ji-young, a researcher at Hana Securities, stated, "Adjustments to the sector index composition due to industry classification changes could lead to rebalancing demand for related ETFs. It is expected that Samsung SDI will move from the KOSPI 200 information technology index to the industrial sector index." He added, "If Samsung SDI is removed, there is a possibility that additional buying demand will arise among existing constituents as the weight of individual stocks within the information technology index is recalibrated."
* This article has been translated by AI.
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