MSCI Strips Chinese Securities From Indexes

Tom Burroughes

16 December 2020

Order may have a significant impact on the investment processes of global investors. Consultation participants highlighted that the ramifications of the Order would effectively challenge the investability of the impacted securities from the perspective of international institutional investors,” MSCI said in a statement yesterday.

“In particular, non-US market participants noted that the extensive presence of US entities, such as commercial banks, broker-dealers, and custodians, within their chain of financial intermediaries would significantly limit their ability to transact in the impacted securities,” the group said.

The move could be an asset allocation blow for wealth managers and other investors with Chinese equity exposures - a problem as China has, arguably, fared relatively well in recovering this year from the COVID-19 pandemic and Chinese GDP is slated to have actually grown this year, contrasting with much of the West.

The organizations affected by MSCI’s index removal include:

SMIC; China Communications Construction; China Spacesat Co; China Railway Construction; CRRC Corp; Hangzhou Hikvision; and Dawning Info. A total of 10 securities are affected – several are listed in Hong Kong as well as in Mainland China.

MSCI said it will announce the final list of security deletions on December 30 this year.