Semi-annual adjustment of MSCI China: 60 new and 21 eliminated

• Changes in constituent stocks: 60 new constituent stocks and 21 eliminated at the same time.From a specific point of viewOverseas Chinese capital stocks are included in 21.The order of weight after inclusion is Poly Xiexin Energy, Hengteng Network, Ganfeng Lithium Industry, Zhaoyan Network, 360 DIGITECH, Qiming Medical-B, Minmetals Resources, China Resources Vientiane Life, Kangfang Bio-B, Tianjing Bio, Fuchuang Services and so on.

  A shares are newly included in 39.The order of weight after inclusion is as follows: Kanglong Kasheng, Baofeng Energy, China Shipbuilding, Huafeng Chemical, Satellite Petrochemical, Yunnan Aluminum Co., Ltd., Oriental Shenghong, Desai Xiwei, Kangxinuo-U, Pengding Holdings, Qibin Group and Superstar Technology, etc.

  meanwhile,21 constituent stocks have been removed from this adjustment.They are Hong Kong stock Aikang Medical, New Oriental online, and A shares of Inner Mongolia first Machine, Shanghai Electric Power, Shenzhen Airport, Jichuan Pharmaceutical, Taiji Industry, Sanquan Food, Optical Technology, Kanghong Pharmaceutical and Sinopharm, etc. For specific adjustment details and weights, please refer to figure 1-2.

  As a result, the number of adjusted constituent stocks has risen from the current 709 to 748 (of which 490 A shares, 12.6% weight B shares, 0.1% weight; 210 Hong Kong stocks, 57.1% weight; 46 Chinese stocks, 30.2% weight).

• In addition to the adjustment of constituent shares, MSCI has also adjusted the free circulation factors of 90 companies (FIF,Foreign Inclusion Factor, such as shells with varying weights, ideal cars, China Feihe, etc.), as well as the number of included shares of 171companies, which will also change the weight of constituent stocks in the index.

Potential impact: pay attention to the potential positive impact on Jiutai Bonda Energy, Financial one account, Baolong Real Estate, and the negative impact on Bohai Bank, Shenzhen Holdings, far East Hongxin, etc.

• From the point of view of the change range of absolute weightWe estimate that affected by this adjustment, the weights of Shell (KE), China Feihe, ideal Automobile (LI AUTO), Poly Xiexin Energy, Tencent Music, Xiaopeng Automobile (XPENG), pinduoduo, Si Moore International, Hengteng Network, Ganfeng Lithium Industry have increased the most, ranging from 0.3% to 0.07%. Among them, the largest increase in the weight of A shares is the Beijing-Shanghai high-speed railway and so on.

  On the contrary, Tencent Holdings, Alibaba, Meituan-W, Industrial and Commercial Bank of China, NetEase, Construction Bank, JD.com, Baidu, Xiaomi Group-W, Weilai and other dilution effects have the largest decline in the weight in the index.

• From the point of view of Yihe position adjustment, we also need to combine the average daily turnover of individual stocks to judge its specific impact.Based on the assumption that passive funds with the current size of $149.4 billion (equivalent to about 5% of the current MSCI China Index's overall market capitalization of ~ 3 trillion US dollars) track the MSCI China Index, and combined with the average daily turnover of individual stocks in the past 20 days, we estimate:

  1）Among the passive capital inflows required, Jiutai Bonda Energy, Financial one account, Baolong Real Estate, Sany International, Burning Stone Medicine, China Resources Vientiane Life, Qiming Medical treatment-B, Shimao Service, Financial Chuangchuang Service, China Feihe, Minmetals Resources, Kangfang Bio-BThe waiting time is the longest, with an average of more than 4 days. China General account takes the longest trading time in A shares, about 1.7 days.

  2）Among the passive capital outflows required for transactions, Bohai Bank, Shenzhen Holdings, far East Hongxin, Wharf Group, Guangfa Securities, North Water Control Group, China Electric Power, Stone four Pharmaceutical Group, Chongqing Rural Commercial Bank, Aikang Medical, Zhengrong Real Estate, New Oriental online, etc., the transaction funds needed for the outflow of funds are the longest, which takes more than 2 days. For details, please see the chart below. The outflow time of Gujinggong B and Lujiazui B in B shares is about 1.8 and 1.6 days.

What happens next: adjustment after closing on May 27 and effective on May 28

After the official results, all adjustments will be implemented after the close on May 27 and will take effect on May 28.

• Capital flow upwardAccording to the historical experience of index adjustment, passive funds in order to minimize the tracking error of the indexIt is usually chosen on the last day, that is, May 27, to adjust the position, so you will often see the "abnormal" magnification of large stocks with large changes in weight, especially at the end of the day.In contrast, active funds do not exist in this constraint, you can choose the opportunity to choose the time of configuration.

• The influence of stock priceAfter the results are announced but before the official implementation date, there will also be some arbitrage funds to allocate stocks according to the official results, especially those unexpected results that have not been fully predicted by the market. However, on the official implementation date of the adjustment, although passive funds "must" adjust their positions according to weight changes, the actual changes in stock prices may not be consistent with the weight adjustment directions. on the contrary, it will be more affected by the contrast between arbitrage funds in advance and passive funds, and there is no lack of stock prices falling on the day of adjustment implementation.We recommend paying attention to the potential impact of some illiquid stocks, such as some B shares.