MSCI Inc. has further reduced the number of Chinese stocks in its indices, responding to the lackluster impact of Beijing’s recent stimulus measures on the market’s representation in regional benchmarks. This adjustment comes alongside an increase in Indian equities within MSCI’s metrics.
The index provider will remove 20 stocks from the MSCI China Index this month, adding to the more than 55 deletions made in each of its previous three reviews. In contrast, MSCI has added five new companies to the MSCI India Index. These changes will take effect after market close on November 25 and will also be reflected in the MSCI All Country World Index.
This revision coincides with Donald Trump’s decisive victory in the U.S. election and highlights that China’s stimulus efforts have not adequately addressed its underlying economic challenges. As a result, the country risks losing its significant share in emerging market portfolios to competitors like India amid ongoing geopolitical tensions with the West.
While China maintains the largest weight in the MSCI Emerging Markets Index at 27%, there is considerable potential for further increases in India’s representation, according to Abhilash Pagaria, an analyst at Nuvama Wealth Management Ltd.
Among the Chinese stocks being removed are Ningbo Joyson Electronic Corp., a supplier for Tesla Inc.; Topsports International Holdings Ltd., a sportswear manufacturer; and Wanda Film Holding Co., a film production company. In contrast, new additions to the India index include Alkem Laboratories Ltd., a pharmaceutical company, and Oberoi Realty Ltd., a real estate developer.
Despite recent rallies in Hong Kong and Chinese equity markets fueled by expectations of additional stimulus from Beijing during its upcoming legislative meetings, analysts suggest that substantial gains may be challenging to achieve.
Conversely, due to MSCI’s latest adjustments, Indian equities are anticipated to attract approximately $2.5 billion in passive foreign inflows, according to Pagaria.
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