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. 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) ; Remove 11 shares at the same time, not involving the subject matter of a shares.
Since the beginning of 2022, despite the continuous adjustment of a shares, the overall net inflow of foreign capital has continued, and the net inflow has reached 26.514 billion yuan. In the view of many insiders, due to the good situation of epidemic prevention and control and economic prospects, the valuation advantages of A-share are gradually emerging, and the trend of foreign capital flowing into A-share market for a long time remains unchanged.
The subject matter of A shares involves these adjustments
Nsci announced the addition and elimination of MSCI global standard, MSCI global small cap, MSCI global small cap and other major index series in this quarterly adjustment. The quarterly review does not involve changes in the inclusion factors of a shares, and the adjustment results will take effect after the closing on February 28, 2022.
The announcement shows that the MSCI global standard index added 21 stocks and eliminated 11 stocks. Among the new components of MSCI Emerging Market Index, the top three stocks with total market value are Gree Electric Appliances Inc.Of Zhuhai(000651) , China Three Gorges Renewables (Group) Co.Ltd(600905) and Trina Solar Co.Ltd(688599) . Specifically, MSCI China A-share index added 9 targets, including Gree Electric Appliances Inc.Of Zhuhai(000651) , China Three Gorges Renewables (Group) Co.Ltd(600905) , China Resources Microelectronics Limited(688396) , China Energy Engineering Corporation Limited(601868) , Cngr Advanced Material Co.Ltd(300919) , Daqin Railway Co.Ltd(601006) , Ningbo Ronbay New Energy Technology Co.Ltd(688005) , Ningbo Shanshan Co.Ltd(600884) , Trina Solar Co.Ltd(688599) , and no A-share targets were excluded.
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, namely Bethel Automotive Safety Systems Co.Ltd(603596) , China Mobile, Cngr Advanced Material Co.Ltd(300919) and Zhejiang Orient Gene Biotech Co.Ltd(688298) ; Three stocks were excluded, namely Jiangsu Shagang Co.Ltd(002075) , Yango Group Co.Ltd(000671) , and St Guoyi; In terms of total market value, China Mobile, Cngr Advanced Material Co.Ltd(300919) and Zhejiang Orient Gene Biotech Co.Ltd(688298) are the three new stocks with the largest total market value. 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 gold exchange (ADR); Excluding five stocks, they are voice network (ADR), Century Internet (ADR), China youzan (Hong Kong stock), Yuhua Education (Hong Kong stock) and St Guoyi. In terms of 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.
In addition to MSCI, FTSE Russell, another major international index company, will also announce its quarterly adjustment results after trading on February 18 local time, which will take effect after the closing on March 18.
Gree Electric Appliances Inc.Of Zhuhai(000651) return to MSCI flagship index
The 100 billion market value white horse stock Gree Electric Appliances Inc.Of Zhuhai(000651) returned to the MSCI flagship index in this quarterly adjustment.
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 did not provide reasons for rejection in the announcement. 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%, exceeding the upper limit of foreign shareholding. The announcement of the Hong Kong Stock Exchange also announced that since Gree Electric Appliances Inc.Of Zhuhai(000651) has a total overseas shareholding ratio of more than 28%, Shenzhen Hong Kong stock connect has suspended accepting the purchase of the stock since December 14, 2020, and the sale will still be accepted.
According to historical experience, after the proportion of foreign capital holding the subject of A-Shares reaches the upper limit, it will be 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.
According to the data on the official website of Shenzhen Stock Exchange, as of February 9, QFII, rqfii and Shenzhen Stock connect investors held a total of 8 stocks whose proportion of A-Shares exceeded the early warning line, Midea Group Co.Ltd(000333) was still listed. Previously, Midea Group Co.Ltd(000333) had also been excluded from the MSCI flagship index for the same reason.
Since the beginning of the year, foreign capital has continued to flow into
Since the beginning of 2022, A-Shares have been adjusted for a time, but the overall foreign capital has continued the trend of net inflow.
According to the data, the net purchase of northbound funds in January was 16.775 billion yuan, 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. The net inflow of foreign capital exceeded 400 million yuan on the last day of the Spring Festival holiday, which is worth noting. On the one hand, this was due to the “Hawk” 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 Spring Festival holiday to avoid market uncertainty.
On the first day of the opening of the year of the tiger, the net inflow of funds from the North resumed, and the net purchase on that day exceeded 5 billion yuan. Yesterday, northbound funds bought another net 4.52 billion yuan. In the four trading days since February, northbound funds bought a total net 9.739 billion yuan.
From the perspective of specific shareholding, in the retreat since the beginning of the year, northward capital added positions against the trend in some large financial sectors and oversold semiconductor, chip and other technology stocks. According to the data, the shareholding ratio of northbound funds in Beijing Huafeng Test & Control Technology Co.Ltd(688200) increased significantly by 5.61 percentage points, ranking first in all targets in Shanghai and Shenzhen stock markets; Among financial stocks, Jiangsu Zhangjiagang Rural Commercial Bank Co.Ltd(002839) and Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) were significantly increased by northbound funds. In addition, some segments of the new energy industry chain have also received foreign attention, and the proportion of northbound capital holdings of multiple shares such as Ningbo Ronbay New Energy Technology Co.Ltd(688005) , Zhejiang Yongtai Technology Co .Ltd(002326) , Shenzhen Dynanonic Co.Ltd(300769) has increased significantly.
Industry insiders believe that China’s economic prospects and epidemic prevention and control remain positive, and emerging market assets represented by Chinese assets 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.
Wang Ying, chief stock strategist of Morgan Stanley China, said that the current opportunity to invest in Chinese assets is rare. In 2021, Morgan Stanley proposed to over allocate a shares, that is, try to allocate more funds to A-Shares in the overall Chinese portfolio. In 2022, the strategy is still effective.
The stock strategy analyst team of Goldman Sachs Group believes that the opening and reform momentum of China’s market is strong, and the A-share market has more investment value for international investors.
