Source: Zhitong Finance
On May 15, MSCI, an international index compiling company, announced its quarterly index adjustment results for May 2024. The adjustment results will take effect after closing on May 31, 2024. In this adjustment, 10 new constituent stocks were added to the MSCI China Index. Hong Kong stocks were included in Hisense Home Appliances and Minmetals Resources, and A shares were included$Zhejiang Wanfeng Auto Wheel (002085.SZ)$Wait 8. At the same time, remove$Hangzhou Binjiang Real Estate Group (002244.SZ)$There are 56 other constituent stocks.
According to data, the MSCI index is the benchmark index most used by global portfolio managers. MSCI routinely adjusts all of its indices four times a year, including larger semi-annual reviews in May and November, and smaller quarterly reviews in February and August. The basis for each adjustment mainly includes indicators such as market value and liquidity.
Specifically, the MSCI China Index now includes a total of 10 new constituent stocks, including two Hong Kong stocks of Hisense Home Appliances and Minmetals Resources, and$Citic Pacific Special Steel Group (000708.SZ)$,$Hisense Home Appliances Group (000921.SZ)$, Wanfeng Aowei,$Jchx Mining Management (603979.SH)$,$Pingdingshan Tianan Coal Mining (601666.SH)$,$Nanjing Iron & Steel (600282.SH)$,$Tiandi Science & Technology (600582.SH)$und$CNOOC Energy Technology & Services (600968.SH)$A total of 8 A-shares.
At the same time, the MSCI China Index excluded 56 constituent stocks, including Jiantao Group,$CHINA CINDA (01359.HK)$, Trinity International,$AIR CHINA (00753.HK)$,$CHINA OVS PPT (02669.HK)$,$DONGFENG GROUP (00489.HK)$und$COSCO SHIP PORT (01199.HK)$Wait for 15 Hong Kong stocks. There is also$Ming Yang Smart Energy (601615.SH)$, Binjiang Group,$Seazen Holdings (601155.SH)$,$Shenzhen S.C New Energy Technology Corporation (300724.SZ)$,$Shanghai Junshi Biosciences Co., Ltd. (688180.SH)$,$Yonghui Superstores (601933.SH)$,$Nanjing King-Friend Biochemical Pharmaceutical (603707.SH)$,$Shenzhen Overseas Chinese Town (000069.SZ)$,$Shanghai Bairun Investment Holding Group (002568.SZ)$,$Greenland Holdings Corporation (600606.SH)$,$iRay Technology (688301.SH)$,$Hoymiles Power Electronics Inc. (688032.SH)$und$Verisilicon Microelectronics (Shanghai) Co., Ltd. (688521.SH)$Forty-one A-shares were removed.
According to a previous analysis by CICC, judging from historical rules, the impact of routine index adjustments on the overall market is manageable. By measuring the performance of the Chinese market (A shares and Hong Kong stocks) one day, three days, and one week after a total of 17 regular adjustments to the MSCI index since 2020, there is no definite pattern of rise and fall, which also shows that the direct impact of the index adjustments is more reflected in the individual stocks involved.
With upward capital flows, CICC pointed out that based on the historical experience of index adjustments, in order to reduce tracking errors in the index as much as possible, passive funds usually choose to adjust positions on the last day, which is May 31, so they often see an “abnormal” increase in individual stock transactions with large weight changes, especially at the end of the session. In contrast, active funds do not have this restriction; they can take the opportunity to choose when to allocate them. The bank recommended focusing on the potential impact of some individual stocks with poor liquidity.
In terms of the impact on stock prices, after the results are announced but before the official implementation date, some arbitrage funds will also lay out corresponding individual stocks based on the official results, especially those unexpected results that were not fully predicted by the market before. However, it should be noted that although passive funds “must” adjust positions according to weight changes on the official implementation date of the adjustment, actual changes in stock prices during this period are not necessarily in line with the direction of weight adjustments. Instead, they will be more affected by the comparison of strength and weakness between early arbitrage funds and passive funds. Previously, there was no shortage of cases where the stock prices of newly included or weighted stocks fell on the day the adjustment was implemented.
It is worth noting that since this year, as the prospects for China's economic recovery have continued to become clear, optimism about “investing in the Chinese market” has continued to increase, and foreign-funded institutions have been looking to expand Chinese assets.
In late April, UBS Global Emerging Market Equities Chief Strategist announced his views on emerging market stock strategies and raised the MSCI China Index rating to overrated. The main reason was that the MSCI China Index had good earnings per share (EPS) performance.
Furthermore, Goldman Sachs Research recently maintained a high rating on China's A-shares, the 2024 MSCI China Index, and$CSI 300 Index (800122.HK)$The expected return is 10%, and the corporate profit growth rate is expected to be 8% to 10%.
Hong Kong stocks were included in the May MSCI China Index:
$HISENSE HA (00921.HK)$: It has surged 90% since February. Goldman Sachs pointed out that maintaining Hisense's “buy” rating, considering more positive growth and profit prospects, in particular the traditional white goods business with clear strategic support, the company's earnings per share from 2024 to 2026 will be raised by 0% to 3%, and the target price will be raised from HK$31 to HK$35.
$MMG (01208.HK)$: It has surged 95% since February. Huafu Securities pointed out that high copper prices are delaying demand in the short term, but supply can be expected to shrink month-on-month, driving copper prices to rise and fall easily. In the medium term, the Fed's interest rate cut is highly deterministic, and the combined mining shortage is difficult to mitigate, supporting the upward movement of copper prices; in the long run, strong demand for new energy sources will drive the supply and demand gap to widen. Currently, copper prices may only be a new starting point for a long time.
Hong Kong stocks partially excluded:
$KINGBOARD HLDG (00148.HK)$: 39% increase since February. Affected by the sharp rise in copper prices, and customers stocked a lot of goods, the company increased the price of materials by 5 yuan/sheet to 10 yuan/sheet, an increase of 5% to 10%. In March of this year, the company increased the prices of all products by 10 yuan/sheet, which was also affected by the sharp rise in copper prices. This is the second increase in prices since this year. Some organizations believe that the performance flexibility of related companies is expected to be unleashed if the prices of major copper-clad plate manufacturers rise again.
$SANY INT'L (00631.HK)$: Up 23% since February. The company's consolidated revenue for the first quarter was about RMB 5.13 billion, down about 5.7% year on year; gross profit was about RMB 1,277.5 billion, down about 4.0% year on year; profit attributable to parent company owners was about RMB 516 million, down about 20.7% year on year. Societe Generale Securities said that Sany International's performance in the first quarter went backwards, and the decline in revenue was mainly due to a clear decline in mining equipment revenue. The company's mining equipment is expected to grow slightly in 2024.
editor/tolk