After the market caused trillions of dollars to evaporate in China, Morgan Stanley Capital International (MSCI IncDozens of Chinese companies were removed from its global benchmark index.
The index provider knocked 66 companies out of the MSCI China Index in its latest quarterly review, the highest number in at least two years. These changes are effective as of 29 February** and also apply to the MSCI All Country World Index. The cuts** include real estate developers Gemdale Group and Greentown China Holdings***, as well as China Southern Airlines*** and Ping An Healthcare Medical Technology***
The elimination of these increases the risk that China's already battered markets will have to remove these from their portfolios. According to data compiled by Bloomberg, there are at least $5.9 billion of exchange-traded** tracking the MSCI China Index, the largest of which is the US-listed iShares MSCI China ETF.
China's weight in global portfolios has been declining amid concerns about China's property sector struggling and weak consumption, and alternatives such as India becoming more prominent. Last week's slew of policy support measures*** faded in the days leading up to the Lunar New Year holiday, showing extreme pessimism about China and Hong Kong**.
This highlights the issue of negative currents in China** as investors have reduced their investment in China, in large part due to recent weakness in fundamentals, but also due to concerns about ongoing financial instability, regulatory uncertainty and, most importantly, country risk," he said. kyle rodda ，capital.com inc.Senior Market Analyst.
"Some investors may also be forced to liquidate because of losses that have already been incurred or because certain companies are no longer part of the scope of investment," he added. ”
Three ** will also be removed from the Hong Kong index: Budweiser Beer Asia Pacific *** New World Development *** and Xinyi Glass Holdings ***
However, these changes are not all due to cuts. The MSCI China Index will add five new companies, including electrical appliance manufacturer Midea Group*** and care company Giant Biogene Holdings***
Still, with trading resuming in Hong Kong on Wednesday, the mass deletions could be stressful. MSCI considers a variety of factors when incorporating ** into its standard index, including market capitalization, free float, and extreme***
Hebe Chen, IG market analyst, said: "The removal of Chinese companies from a wide range of sectors from technology, real estate, retail to healthcare reinforces the perception of systemic concerns about the world's second-largest economy. "The market ***
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