MSCI China Index latest adjustment: Huaneng Hydropower and Shenghong Technology included, 60 stocks removed
2024-08-14
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In August, two new stocks were added to the MSCI China A-share Index.
In the early morning of August 13th, Beijing time, the international index compiler MSCI announced the results of its quarterly index adjustment in August 2024. The latest adjustment involves the addition and removal of major index series such as global small-cap stocks, global investable markets, and frontier markets. The above adjustment results will take effect after the close of August 30, 2024.
Among them, regarding A-shares, the MSCI China Index included 2 constituent stocks in this adjustment, both of which are A-shares, namely Huaneng Hydropower (600025.SH) and Shenghong Technology (300476.SZ); at the same time, 60 constituent stocks were removed, of which 5 were Hong Kong stocks, namely China Duty Free Group (01880.HK), Fuyao Glass (06865.HK), Ganfeng Lithium (01772.HK), GF Securities (01776.HK) and Hygeia Medical (06078.HK). Another 55 A-shares were removed, namely Emma Technology, AVIC Industrial Finance, Foton Motor, China Baoan, China Film, Zhenhua Technology, CSSC Technology, Dasanlin, First Capital, HEC, KingMed Diagnostics, ViewSonic, Yuexiu Capital, Hangzhou Oxygen, Robam Electric, Haohua Technology, Hesteel, Hengdian Dongmei, Gujia Furniture, Quartz, Jizhong Energy, Kangyuan, Zhongju High-Tech, Kaiying Network, MGI, Shanshan Group, Oriental Pearl, People's Daily Online, Sangfor, Yuyuan Group, Aixu, Shanghai Construction Group, Jinjiang Hotels, Mingzhi Electric, Meiya Energy, TISCO Stainless, Shede Wine, Kangtai Biological, Kedali, Sichuan Changhong, Hebang Biotechnology, Shuijingfang, Sinoma Technology, China Mining Resources, Songcheng Performing Arts, Star Semiconductor, Lanxiao Technology, ThunderSoft, TF Securities, Watson Bio, Wuchuangda, Fara Electronics, Yongxing Materials, Yunda and Beitanni.
The adjusted number of constituent stocks was reduced from 655 to 597 (432 A shares, with a weight of 15.2%; 148 Hong Kong stocks, with a weight of 75.3%; 14 Chinese stocks concept-listed in the US, with a weight of 9.2%; and 3 B shares, with a weight of 0.2%).
In addition to the adjustments to the constituent stocks, MSCI also adjusted the free float factors (FIF, Foreign Inclusion Factor) of 15 companies and the included share capital of 150 companies, which will also change the weights of the constituent stocks in the index.
In terms of the absolute weight change, CICC estimates that Pinduoduo, ICBC, Huaneng Hydropower, Pop Mart and Zijin Mining ranked high in terms of weight increase, ranging from 0.7% to 0.2%. On the contrary, Alibaba-SW, Tencent Holdings, Hygeia Healthcare and Meituan-W saw the largest decrease in weight in the index due to dilution or exclusion, ranging from 0.2% to 0.05%.
CICC pointed out that in terms of capital flows, based on historical experience of index adjustments, passive funds usually choose to adjust their positions on the last day, August 30, in order to minimize the tracking error of the index. Therefore, we often see "abnormal" amplification of transactions of stocks with large weight changes, especially in the late trading. In contrast, active funds do not have this constraint and can choose the time to allocate. CICC recommends paying attention to the potential impact of some stocks with poor liquidity.
"In terms of the impact on stock prices, after the results are announced but before the official implementation date, some arbitrage funds will deploy corresponding stocks based on the official results, especially those unexpected results that the market had not fully predicted before. However, it should be noted that although passive funds 'must' adjust their positions according to weight changes on the official implementation day of the adjustment, the actual stock price changes during this period may not be consistent with the direction of the weight adjustment. Instead, they will be more affected by the strength comparison between early arbitrage funds and passive funds. There have been cases in the past where the stock prices of newly included or increased weighted stocks fell on the day of the adjustment implementation." CICC said.
The Paper reporter Ding Xinqing
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