Korea Stock Exchange: Changes In Calculation Method Of KOSPI IT Index

Effective From November 10, 2003, the Korea Stock Exchange will change the calculation method of the KOSPI IT (Information Technology) index. Presently the IT index is a broad-based index, but it will be changed into a narrow-based one. The KSE started publishing the KOSPI IT index in March 2000 (base date and index: January 4, 2000 and 1.000). Reflecting investors' opinions that too many stocks are included in the index and the weight of some big-capitalization stocks are too high, the KSE will improve the calculation method of the IT index.

Adjustment of Constituent Stocks

• The number of constituent stocks will be reduced to 20. Presently all stocks, which are categorized into the IT industry, are included in the IT index.

Selection Criteria for Constituent Stocks

• To be included in the index, a company should among top 50% company in ROE in the IT industry and rank among top 70% company in the daily trading value in the IT industry.
• Among the companied that meet the above criteria, top 20 companies with the largest market capitalization will be selected as the constituent stocks of the IT index.

Change of Constituent Stocks

• The constituent Stocks will be regularly changed on July 1 every year. In special cases such as delisting or merge, however, there will be immediate change of constituent stocks.

Cap on the Weight of Market Capitalization

• Cap will be imposed on the weight of market capitalization to prevent the overweight of specific stocks in the IT index. In cases where the market capitalization of specific stocks exceeds 20% of total market capitalization of KOSPI IT industry, the weight of the stocks will be limited to 20%. The same rule will be applied to the stocks whose market capitalization exceeding 10% of the total market capitalization of the KOSPI IT industry. In this case, the weight of the stocks will be limited to 10%.