MSCI to Remove 60 Chinese Stocks from Global Indexes in Latest Quarterly Review

Global index compiler MSCI has announced the removal of 60 Chinese stocks from its indexes during its latest quarterly review, marking the third consecutive reduction this year. This move highlights the diminishing role of Chinese equities in the portfolios of overseas investors.

According to a statement released by MSCI on Monday, 56 companies listed on China’s onshore exchanges and four listed in Hong Kong will be excluded from the MSCI China Index by the end of August. Notable companies set to be removed include Beiqi Foton Motor, a major player in China’s car industry, and People.cn, a state-backed media and advertising firm. Hong Kong-listed companies such as China Tourism Group Duty Free, Flat Glass Group, Ganfeng Lithium Group, and GF Securities will also be ejected.

These adjustments will impact other major MSCI indexes, including the MSCI Emerging Markets Index and the MSCI All Country World Index. As of July, Chinese stocks accounted for roughly 22% of the MSCI Emerging Markets gauge.

This latest rebalancing underscores the declining appeal of Chinese stocks among global investors, who have been reducing their exposure to these shares in recent years amid regulatory crackdowns on technology companies and an ongoing property market crisis. In May, MSCI removed 56 stocks from its indexes, following the removal of 66 equities in February.

The MSCI China Index has seen a modest 1% increase this year, erasing most of the gains made earlier in 2024 after state interventions aimed at stabilizing the market. In comparison, the MSCI Emerging Markets Index has gained 4.4%, and the MSCI India Index has surged 18%.

Despite some global hedge funds increasing their holdings of Chinese onshore stocks last month, overall positions remain near a five-year low, according to Goldman Sachs. Investor sentiment has been dampened following the third plenum and the Politburo meeting last month, as the lack of strong follow-up measures to boost growth and address market challenges has left many disappointed.

While Chinese stocks face a decline, MSCI has added two new Chinese companies to its indexes: Huaneng Lancang River Hydropower, a power-generating equipment maker, and Victory Giant Technology, a manufacturer of printed circuit boards. Huaneng Lancang saw its stock rise 1.3% to 11.52 yuan in Shanghai on Tuesday, while Victory Giant jumped 5% to 34.59 yuan in Shenzhen.

In contrast, MSCI is adding seven Indian stocks to its global indexes while removing only one, reflecting the strength and resilience of the Indian market. Among the additions are Dixon Technologies India, a supplier for Samsung Electronics, and Oil India, while Bandhan Bank has been omitted.

The Hang Seng Indexes Company, which compiles benchmarks for the Hong Kong Stock Exchange, is scheduled to announce its quarterly review of the Hang Seng Index on Friday.