MSCI Inc is cutting dozens of Chinese companies from its global benchmarks, after many stocks tumbled as the market erased trillions of dollars in value.
The index provider is removing 66 companies from its MSCI China Index in its latest quarterly review, the highest tally in at least two years.
The changes, effective as of the close on Feb. 29, also apply to the MSCI All Country World Index.
Photo: Reuters
Stocks to be cut include property developers Gemdale Corp (金地) and Greentown China Holdings Ltd (綠城中國), as well as China Southern Airlines Co (中國南方航空) and Ping An Healthcare and Technology Co (平安健康互聯網).
The removals come as China’s weighting in global portfolios slumps amid worries about its struggling property sector and weak consumption, and as alternatives such as India become more prominent.
In a sign of the deep pessimism about the China and Hong Kong stock markets, equity rallies spurred by a slew of policy support measures last week faded within a few sessions ahead of the Lunar New Year break.
“It highlights the issue of negative flows for Chinese stocks as investors reduce exposure to the country, in large part due to recent weak fundamentals, but also fears of ongoing financial instability, regulatory uncertainty, and — most of all — country risk,” Capital.Com Inc senior analyst Kyle Rodda said.
“Some investors may also be forced to liquidate because of losses already incurred or because certain companies no longer fall within investment mandates,” he added.
Three stocks are to be deleted from the Hong Kong index as well: Budweiser Brewing Co APAC Ltd, New World Development Co (新世界發展) and Xinyi Glass Holdings Ltd (信義玻璃控股).
Index-hugging funds will have to purge these stocks from their portfolios. There is at least US$5.9 billion in exchange-traded funds tracking the MSCI China Index, the largest of which is the US-listed iShares MSCI China ETF, according to Bloomberg-compiled data.
The news was not all about cuts, though. Five components are to be added to the MSCI China Index, including electrical-appliance maker Midea Group Co (美的集團) and skin-treatment company Giant Biogene Holding Co (巨子生物).
Still, the high number of deletions could weigh as Hong Kong resumes trading today. MSCI takes a number of factors into account for including stocks in its standard indices including market capitalization, free float and extreme price increases.
“The deletion list of Chinese companies, spanning across a wide range of sectors from technology, property and retail to healthcare, solidifies the perception of systemic-based concerns over the world’s second-largest economy,” IG Markets Ltd analyst Hebe Chen (陳碧菲) said.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort