MSCI Indexes to Remove 60 Additional Chinese Stocks

August 13, 2024 TruthUSA

There have been almost 200 Chinese stocks removed from indexes this year due to global investors’ cautious approach towards market and geopolitical risks.

MSCI Inc. has announced the removal of 60 more Chinese stocks from its indexes in the latest quarterly review, marking the third significant removal of Chinese stocks from the MSCI Global Standard indexes this year. This follows the removal of 66 and 56 stocks in February and May, respectively.

Additionally, seven Indian stocks have been added to the list, bridging the investment gap between the two countries.

In a list published on Monday, MSCI Inc. stated that it is including two Chinese stocks in its global standard indexes while removing stocks of 60 Chinese companies and one from Hong Kong.

The additions include the state-owned hydropower firm Huaneng Lancang and circuit board manufacturer Victory Giant. On the other hand, companies like CSSC Science & Technology Co. Ltd., AVIC Industry-finance Holdings, People.cn, and China Film Group Corporation are among those being removed from the indexes.

These changes will impact the MSCI All Country World Index and the MSCI Emerging-Markets Index, with a significant number of stocks being removed from the MSCI China-A onshore index and the MSCI China all shares index.

Huaneng Lancang and Victory Giant will be included in the indexes, while there will be multiple removals from the China all shares index and the A onshore index.

Although China experienced a substantial reduction in the latest MSCI indexes review, India saw an increase in stocks added, narrowing the gap between the two countries.

According to Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research, China’s weight on the MSCI index will decrease from 24.8 percent to 24.2 percent, while India’s weight will rise to 19.8 percent from 19.2 percent.

In June, MSCI released a blog reflecting investors’ increased caution towards market and geopolitical risks in China, alongside China’s growing outbound investments.

Record Loss in Foreign Investment

China’s State Administration of Foreign Exchange published provisional figures on Friday indicating a record $14.8 billion outflow by foreign investors in the second quarter of this year.

This marks the second consecutive quarter where foreign investors withdrew more money from China than they invested, following the third quarter of 2023 when $12.1 billion of foreign direct investments were withdrawn.

This decline follows a peak in net foreign direct investments of $107.2 billion in the first quarter of 2022, with the current net loss in the first half of 2024 amounting to $5.91 billion.

(Source: The Epoch Times / China's foreign direct investment liabilities data published by the State Administration of Foreign Exchange) — (Source: The Epoch Times / China’s foreign direct investment liabilities data published by the State Administration of Foreign Exchange)

This marks the first time the semiannual figure has dropped below zero, indicating a potential net outflow of foreign direct investments for the entirety of 2024.

The decline in foreign direct investment in 2024 follows significant declines in the previous two years, with SAFE statistics showing a substantial drop in China’s annual foreign direct investment liabilities in 2023 compared to previous years.

In 2023, China’s annual foreign direct investment liabilities stood at $42.7 billion, significantly lower than previous years and indicative of a depreciating trend in foreign direct investments in the country.

This decline follows a peak in 2021 when net foreign direct investments reached $344.1 billion, emphasizing the downward trend in foreign investments in China.

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