MSCI axes dozens more Chinese stocks from global indices #NewsMarket

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MSCI has removed dozens of Chinese securities from its global benchmarks for the third consecutive quarter, in a move that will increase the weighting of India and other Asian markets in emerging markets indices.

The US index giant will remove 60 constituents from the flagship MSCI China index, which covers about 85 per cent of the entire global equities universe, including H shares, red chips and American depositary receipts, according to its latest quarterly review published this week.

This brings the number of Chinese stocks removed from the MSCI Global Standard indices to nearly 200 in 2024 alone, after MSCI culled 66 constituents in February and 56 companies in May.

Among the companies that will be scrapped from the index include investment holding firm First Capital, local brokerage GF Securities, listed online game company Kingnet Network and Xu Wenrong-founded conglomerate Hengdian Group.

This article was previously published by Ignites Asia, a title owned by the FT Group.

Concurrently, it will be adding two new companies, hydropower developer Huaneng Lancang River Hydropower, one of the largest additions to the emerging markets index measured by full-company market capitalisation, and electronics manufacturer Victory Giant.

These changes will be made as of August 30 and will also be applied to the MSCI All Country World index and the provider’s emerging market index.

The move by MSCI could force index-tracking funds to sell their Chinese investments, heightening the exodus from the world’s second-largest market and shifting allocations towards other emerging markets such as India.

MSCI will also add seven new Indian companies to its indices, including telecommunications firm Vodafone India and electronics manufacturer Dixon Technologies. It will also remove Bandhan Bank from its indices.

In May, the index provider added 13 Indian securities to its indices and welcomed five new Indian firms to its benchmarks in February.

Meanwhile MSCI’s emerging market ex-China index, which was launched in 2017, has over the past three years gained prominence amid Beijing’s strict zero-Covid policies and weak economic recovery.

BlackRock‘s iShares MSCI Emerging Markets ex China ETF, which is benchmarked against the MSCI Emerging Markets ex-China Index, has seen its assets grow to $14.9bn as of August 12 from just $164mn as of end-2020, based on data from its official website and Bloomberg.

In contrast, the iShares MSCI China ETF has seen its market capitalisation decline to about $4.3bn as of August 12.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.