Recently, MSCI, FTSE Russell, Hang Seng and other index companies have made quarterly adjustments to their indexes.
On February 18, Hang Seng Index Co., Ltd. announced the results of the quarterly review of the index series. Lenovo Group and nongnongshanquan were newly included in the Hang Seng Index, while Hang Seng technology index joined several stocks such as Shangtang group, Xiaopeng automobile and ideal automobile. In addition, several indexes such as the Hang Seng Composite Index and the Hang Seng China enterprise index have also been adjusted.
On the same day, FTSE Russell also announced the quarterly review results of the flagship FTSE global stock index series in February 2022; Prior to this, on February 10, MSCI has announced the quarterly index adjustment results in February 2022, involving MSCI China Index, MSCI China A-share onshore index and other indexes.
The above index adjustment will take effect in the coming month. With the index adjustment, the fund products following these indexes will also passively adjust their positions, and the “abnormal” amplification of trading volume and volatility of relevant stocks may occur.
adjustment of multiple Hang Seng index components
On February 18, Hang Seng Index Co., Ltd. announced the results of the quarterly review of the index series. The constituent stocks of several indexes have changed, and all changes will take effect on Monday, March 7, 2022.
Among them, the Hang Seng index will join Lenovo Group and nongnongshan spring in this adjustment. No company will be eliminated, and the number of constituent stocks will rise to 66. In terms of industry proportion, the proportion of financial industry in the Hang Seng index decreased from 38.35% to 36.44%, and the proportion of industry and Commerce increased from 50.22% to 52.28%; The proportions of Tencent holdings, Alibaba and jd.com in the Hang Seng index were increased to 8%, 7.78% and 1.94% respectively, and the proportions of meituan, China Mobile and Xiaomi in the Hang Seng index were reduced to 6.89%, 2.50% and 2.12% respectively.
It is worth noting that the Hang Seng Index company conducted a consultation on optimizing the Hang Seng Index in December 2020 and plans to increase the number of index constituent stocks from 55 to 80 by mid-2022. However, as of this adjustment, the Hang Seng Index has only increased by 11 constituent stocks, far from the target of 80.
In this regard, the Hang Seng Index company explained, “the speed of adding component stocks did not meet expectations, because we carefully selected stocks in the process of index review. We believe that it is more important to select high-quality stocks in the process of optimization, and the threshold for selecting new blue chip stocks should not be reduced simply to achieve the goal of 80.”
In addition, the number of shares in the “ideal travel group” and “Xiaocheng Hong Kong Group” was adjusted, and only the number of shares in the “ideal travel group” and “Xiaocheng Hong Kong Group” was deleted at the same time. After adjusting, Tencent’s share holding, Alibaba and Kwai’s share in the Hang Seng technology index dropped to 8%, while the proportion of the US group, the millet group and the Jingdong group rose to 8%.
Hang Seng China enterprise index will be included in Xinyi solar energy, and Evergrande property will be excluded, and the number of constituent stocks will remain 50.
It is worth noting that this adjustment also involves the semi annual index review of Hang Seng Composite Index. Since the index is also the sample space of Hong Kong stock connect, that is, after the index adjustment, Shanghai and Shenzhen Stock Exchange will then adjust the investment target range of Shanghai and Shenzhen Hong Kong stock connect on this basis, which has attracted the attention of many investors.
According to the announcement, after this adjustment, the number of constituent stocks of the Hang Seng Composite Index will increase from 500 to 517. Among them, 29 stocks were included in Shangtang group, China nonferrous metals, China National Gold Group Gold Jewellery Co.Ltd(600916) , clover biology, minimally invasive Siasun Robot&Automation Co.Ltd(300024) , microblog, Netease cloud music, green city management, etc; The 12 stocks excluded are mostly related to the real estate and education industries, such as Henglong group, huaxiangnian, Shidai neighborhood, etc.
MSCI and FTSE Russell also adjusted the index
In addition to hang seng index company, recently, MSCI and FTSE Russell, the world’s top two data compilation companies, also announced the index adjustment results in February 2022.
On February 18, Beijing time, FTSE Russell announced the quarterly review results of the flagship FTSE global stock index series (hereinafter referred to as FTSE GEIs) in February 2022. The announcement shows that FTSE Russell only makes routine technical adjustments to the index constituent stocks this time, and does not involve the changes of the inclusion factors of a shares.
Specifically, its flagship index FTSE GEIs includes 102 new Chinese A shares this time, including 26 large cap a shares, including Bloomage Biotechnology Corporation Limited(688363) , Eastroc Beverage (Group) Co.Ltd(605499) , Trina Solar Co.Ltd(688599) ; 4 mid cap a shares, including China Southern Power Grid Energy Efficiency&Clean Energy Co.Ltd(003035) , Guangzhou Pearl River Piano Group Co.Ltd(002678) , Western Mining Co.Ltd(601168) , Sansure Biotech Inc(688289) ; There are 72 small cap a shares, including Chongqing Fuling Electric Power Industrial Co.Ltd(600452) , Kingnet Network Co.Ltd(002517) , Shanghai Milkground Food Tech Co.Ltd(600882) . The above changes will take effect after the closing on March 18 (before the opening on March 21).
Prior to this, on February 10, MSCI also announced the quarterly index adjustment results in February 2022, including MSCI China Index, MSCI China A-share onshore index and MSCI China all stock index. The adjustment results will take effect after the closing on February 28, 2022.
Specifically, 10 new targets of MSCI China Index this time are China Energy Engineering Corporation Limited(601868) , China Resources Microelectronics Limited(688396) , China Three Gorges Renewables (Group) Co.Ltd(600905) , Cngr Advanced Material Co.Ltd(300919) , Daqin Railway Co.Ltd(601006) , Gree Electric Appliances Inc.Of Zhuhai(000651) , land fund exchange (ADR), Ningbo Ronbay New Energy Technology Co.Ltd(688005) , Ningbo Shanshan Co.Ltd(600884) , Trina Solar Co.Ltd(688599) , involving multiple energy and technology stocks; Excluding four Chinese stocks, none of them involves a shares. The excluded stocks include voice network ADR, China youzan (H shares), Yuhua Education (H shares) and Century Internet ADR.
In addition, the list of constituent stocks of MSCI China A-share onshore index and MSCI China all stock index has also been adjusted. Among them, MSCI China A-share onshore index increased by 4 constituent stocks, namely Bethel Automotive Safety Systems Co.Ltd(603596) , China Mobile, Cngr Advanced Material Co.Ltd(300919) , Zhejiang Orient Gene Biotech Co.Ltd(688298) ; Eliminate 3 objects. MSCI China all stock index added 5 new targets, including Gree Electric Appliances Inc.Of Zhuhai(000651) , Cngr Advanced Material Co.Ltd(300919) , Lujin exchange ADR, etc; Eliminate 5 objects.
It is worth noting that in this adjustment, there are many A-Shares newly included in MSCI China Index and FTSE Russell GEIs index, including China Energy Engineering Corporation Limited(601868) , China Resources Microelectronics Limited(688396) , Daqin Railway Co.Ltd(601006) , Ningbo Shanshan Co.Ltd(600884) , Trina Solar Co.Ltd(688599) .
related stocks may be impacted by capital flow
as the constituent stocks of the above-mentioned important indexes change, the relevant index funds will also adjust their positions, and the newly incorporated enterprises will get more capital allocation; The excluded enterprises will be passively sold by the relevant index funds.
In terms of capital flow, according to the historical experience of index adjustment, passive funds usually adjust their positions on the last day in order to reduce the tracking error of the index as much as possible. Therefore, they often see the “abnormal” amplification of the transaction of individual stocks with large weight changes, especially in the late trading.
In terms of stock price impact, from the announcement of the results to the formal implementation date, there will also be some arbitrage funds to distribute corresponding stocks according to the formal results, especially those unexpected results that have not been fully predicted by the market before.
However, on the official implementation date of the adjustment, although the passive funds “must” adjust their positions according to the weight change, the actual change of the stock price may not be consistent with the weight adjustment direction. On the contrary, it will be more affected by the comparison between the strength of early arbitrage funds and passive funds. Previously, there was no lack of decline in the stock price of newly incorporated or weighted stocks on the implementation date of the adjustment.
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