Market Overview

Stock index giant MSCI to remove some Chinese stocks under U.S. pressure

Global investors are turning cautious on investing in some Chinese companies named in a U.S. government executive order. MSCI, one of the largest stock index companies in the world, announced Tuesday that it would remove 10 Chinese securities from its indexes effective at the close of businesses on Jan. 5, 2021.

The removals follow U.S. President Donald Trump’s order on Nov. 12 that bans American companies and individuals from owning shares of Chinese companies that the White House alleges supports China’s military.

“This itself is not economically earthshaking, but it is something that makes you take note because it was pretty quick how all this happened,” said James Early, CEO of investment research firm Stansberry China. “It’s not MSCI. It’s market participants driving this. … They’re doing this because the market is telling them they have to.”

MSCI said in a release its decision was based on responses from more than 100 market participants worldwide, who noted the “extensive presence” of U.S. financial entities in the investment processes of global investors could significantly hinder transactions in the affected stocks.

The seven companies that MSCI plans to delete from its global investable market indexes are: chipmaker SMIC, video surveillance company Hikvision, railway manufacturers CRRC and China Railway Construction, supercomputer company Dawning Information Industry, infrastructure developer China Communication Construction and satellite manufacturer China Spacesat.

Subsidiaries and affiliates are not affected, MSCI said. The removals do not necessarily include both the Hong Kong and mainland Chinese listings, and represent a tiny fraction of a percent of the major MSCI indexes.

S&P Dow Jones Indices and FTSE Russell announced in the last few weeks they would make similar deletions, according to Reuters. U.S.-based trading app Robinhood has also updated its website to say users cannot trade in Chinese stocks affected by the order.

Stock index giant MSCI to remove some Chinese stocks under U.S. pressure, CNBC, Dec 16

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