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.
Hon Hai Precision Industry Co (鴻海精密) yesterday said that its research institute has launched its first advanced artificial intelligence (AI) large language model (LLM) using traditional Chinese, with technology assistance from Nvidia Corp. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), said the LLM, FoxBrain, is expected to improve its data analysis capabilities for smart manufacturing, and electric vehicle and smart city development. An LLM is a type of AI trained on vast amounts of text data and uses deep learning techniques, particularly neural networks, to process and generate language. They are essential for building and improving AI-powered servers. Nvidia provided assistance
DOMESTIC SUPPLY: The probe comes as Donald Trump has called for the repeal of the US$52.7 billion CHIPS and Science Act, which the US Congress passed in 2022 The Office of the US Trade Representative is to hold a hearing tomorrow into older Chinese-made “legacy” semiconductors that could heap more US tariffs on chips from China that power everyday goods from cars to washing machines to telecoms equipment. The probe, which began during former US president Joe Biden’s tenure in December last year, aims to protect US and other semiconductor producers from China’s massive state-driven buildup of domestic chip supply. A 50 percent US tariff on Chinese semiconductors began on Jan. 1. Legacy chips use older manufacturing processes introduced more than a decade ago and are often far simpler than
STILL HOPEFUL: Delayed payment of NT$5.35 billion from an Indian server client sent its earnings plunging last year, but the firm expects a gradual pickup ahead Asustek Computer Inc (華碩), the world’s No. 5 PC vendor, yesterday reported an 87 percent slump in net profit for last year, dragged by a massive overdue payment from an Indian cloud service provider. The Indian customer has delayed payment totaling NT$5.35 billion (US$162.7 million), Asustek chief financial officer Nick Wu (吳長榮) told an online earnings conference. Asustek shipped servers to India between April and June last year. The customer told Asustek that it is launching multiple fundraising projects and expected to repay the debt in the short term, Wu said. The Indian customer accounted for less than 10 percent to Asustek’s
Gasoline and diesel prices this week are to decrease NT$0.5 and NT$1 per liter respectively as international crude prices continued to fall last week, CPC Corp, Taiwan (CPC, 台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. Effective today, gasoline prices at CPC and Formosa stations are to decrease to NT$29.2, NT$30.7 and NT$32.7 per liter for 92, 95 and 98-octane unleaded gasoline respectively, while premium diesel is to cost NT$27.9 per liter at CPC stations and NT$27.7 at Formosa pumps, the companies said in separate statements. Global crude oil prices dropped last week after the eight OPEC+ members said they would
RSS