On the morning of February 10, Beijing time, MSCI, an international index compilation company, announced its quarterly adjustment results of the index in February 2022. The adjustment results will take effect after the closing on February 28, 2022.
In this adjustment, 21 new stocks were added to MSCI global standard index, including 9 A-share targets such as Gree Electric Appliances Inc.Of Zhuhai(000651) ; At the same time, 11 shares were removed without the subject matter of a shares. Among the new components of MSCI Emerging Market Index, the top three stocks in the city are Gree Electric Appliances Inc.Of Zhuhai(000651) , China Three Gorges Renewables (Group) Co.Ltd(600905) and Trina Solar Co.Ltd(688599) .
The subject matter of A shares involves these adjustments
The quarterly adjustment announced the addition and elimination list of major index series such as MSCI global standard, MSCI global small cap and MSCI global small cap. MSCI’s quarterly review does not involve changes in the inclusion factors of a shares. At the same time, according to the practice and the adjustment of Shanghai and Shenzhen Stock connect, MSCI still transfers in and out some A shares.
Specifically, 21 new stocks were added to the MSCI global standard index, excluding 11 stocks. The newly included stocks with the largest market value in the global index include grab Holdings (Singapore), aercap holdings NV (Netherlands) and Kimco realty Corp (US stocks). Among the new components of MSCI Emerging Market Index, the top three stocks in the city are Gree Electric Appliances Inc.Of Zhuhai(000651) , China Three Gorges Renewables (Group) Co.Ltd(600905) and Trina Solar Co.Ltd(688599) .
specific to MSCI China A-share index, 9 targets such as Gree Electric Appliances Inc.Of Zhuhai(000651) , China Three Gorges Renewables (Group) Co.Ltd(600905) , China Resources Microelectronics Limited(688396) were added, and no A-share targets were excluded.
New targets of MSCI China A-share index
In addition to the global index series, the list of constituent stocks of MSCI China all stock index and MSCI China A-share onshore index has also been adjusted. However, there are relatively few overseas funds tracking the above two indexes, and the adjustment may not bring significant capital in and out.
MSCI China A-share onshore Index added 4 constituent stocks, excluding 3 stocks, and China Mobile, Cngr Advanced Material Co.Ltd(300919) and Zhejiang Orient Gene Biotech Co.Ltd(688298) were the largest 3 new stocks in terms of total market value. MSCI China A-share onshore Small Cap Index added 2 targets this time and eliminated 3 targets.
China A-share onshore index
In addition, five new stocks were added to the MSCI China stock index, namely Bethel Automotive Safety Systems Co.Ltd(603596) , Cngr Advanced Material Co.Ltd(300919) , Gree Electric Appliances Inc.Of Zhuhai(000651) , Zhejiang Orient Gene Biotech Co.Ltd(688298) and the land financial exchange (ADR); Excluding five stocks, they are voice network (ADR), Century Internet (ADR), China youzan (Hong Kong shares), Yuhua Education (Hong Kong shares) and St Guoyi. Based on the total market value, Gree Electric Appliances Inc.Of Zhuhai(000651) , Cngr Advanced Material Co.Ltd(300919) and Land Financial Exchange (ADR) are the largest three new stocks; MSCI China all stock Small Cap Index added 4 stocks and eliminated 3 stocks.
Gree Electric Appliances Inc.Of Zhuhai(000651) back to MSCI
It is worth noting that the 100 billion giant white horse stock Gree Electric Appliances Inc.Of Zhuhai(000651) returned to the MSCI index in this quarterly adjustment.
Previously, in December 2020, MSCI announced that Gree Electric Appliances Inc.Of Zhuhai(000651) would be removed from the MSCI standard index and large stock series, with effect from December 17. MSCI announcement does not provide reasons for rejection. However, according to the data of Shenzhen Stock Exchange, at that time, the proportion of Gree Electric Appliances Inc.Of Zhuhai(000651) A shares held by QFII, rqfii and Shenzhen Stock connect investors rose to 28.07%. The Hong Kong Stock Exchange has also announced that since the total overseas shareholding ratio of Gree Electric Appliances Inc.Of Zhuhai(000651) exceeds 28%, Shenzhen Hong Kong stock connect will suspend accepting the purchase of the stock from December 14, 2020, and the sale will still be accepted.
According to the data on the official website of Shenzhen Stock Exchange, as of February 8, QFII, rqfii and Shenzhen Stock connect investors held a total of 8 stocks whose proportion of A-Shares exceeded the warning line, Midea Group Co.Ltd(000333) was still listed. Previously, Midea Group Co.Ltd(000333) had also been excluded from the MSCI index for the same reason.
According to historical experience, after the proportion of foreign capital holding the subject of A-Shares reaches the upper limit, it is excluded by major international index companies because it no longer has investment space. After that, the index company will observe the excluded targets for 12 months. If the conditions are met again after 12 months, it will consider re inclusion.
Since the beginning of the year, foreign capital has continued to flow into
Since the beginning of 2022, although A-Shares have been adjusted for a time, the overall trend of net inflow of foreign capital has continued.
According to wind data, the north capital swept 16.775 billion yuan in January, of which the net inflow of Shanghai Stock connect exceeded 18.5 billion yuan and the net outflow of Shenzhen Stock connect was 1.8 billion yuan. Among them, the net inflow of foreign capital in the first three weeks of January exceeded 34 billion yuan, but there was a significant outflow of more than 10 billion yuan per day in the last two trading days before the Spring Festival. On the one hand, this is due to the hawkish attitude of the Federal Reserve at that time, and overseas funds contracted their positions in emerging markets. On the other hand, some active funds chose to sell before the long holiday to avoid market uncertainty.
On the first day of the opening of the year of the tiger in the lunar calendar, northbound funds resumed net buying, with a net buying of more than 5 billion yuan on that day. Since February, a total of 5.219 billion yuan has been bought in three trading days.
Industry insiders believe that due to proper epidemic prevention and control and good economic prospects, emerging market assets such as China are gradually gaining financial favor. At present, the valuation advantage of A-share is gradually emerging, and the situation of foreign capital flowing into A-share market for a long time remains unchanged.
The stock strategy analyst team of Goldman Sachs Group said that the opening and reform momentum of China’s market may make the A-share market more valuable and accessible to international investors. China Industrial Securities Co.Ltd(601377) also believes that multiple factors, including the deepening of the opening of the capital market, the higher valuation cost performance of a shares, its independence from U.S. stocks and the low proportion of foreign capital in a shares, will still drive the continuous inflow of northward funds into a shares.
Wang Ying, chief equity strategist of Morgan Stanley China, said that the current opportunity to invest in Chinese assets is rare. In 2021, Morgan Stanley suggested over allocation of a shares, that is, try to allocate more funds to A-Shares in the overall Chinese portfolio. In 2022, the strategy is still effective.
