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Summary
- MSCI Inc has announced to delete as many as 10 Chinese securities from its GIMI series
- The final list of securities that will be removed from GIMI series will be released on 30 December
- MSCI has said it would launch similar versions of the indexes that would retain the deleted securities.
New York-headquartered global securities index manager MSCI Inc announced on Tuesday that it would delete 10 Chinese securities from the Global Investable Market Index (GIMI) series after the US imposed restrictions on their ownerships. The changes are scheduled to come into effect at the close of businesses on 5 January.
The order
The MSCI decision has been made in accordance with the executive order issued by the Donald Trump administration on 12 November that prohibited Americans from investing in 31 Chinese enterprises. Later, the list was expanded to 35 firms.
As per the MSCI, the removal of Chinese securities will be done after conducting an extensive outreach with the global investment community. The final list of securities that will be removed from the GIMI series will be released on 30 December.
MSCI is expected to launch similar versions of global, regional and country indexes that are supposed to retain the securities that will be deleted in order to calculate the unconstrained market return.
List of securities
The Chinese securities that are set to be removed from the MSCI GIMI series include SMIC, HANGZHOU HIKVIS A (HK-C), CHINA COMMUNIC CONST H, CHINA COMMU CON A (HK-C), DAWNING INFO A (HK-C), CRRC CORP H, CHINA RAILWAY CONST H, CHINA SPACESAT A (HK-C), CRRC CORP H, and CHINA RAIL CONST A(HK-C).
The list includes the securities issued by the Chinese companies, not any securities floated by the subsidiaries or its affiliates. All these securities cumulatively represent 0.04 per cent of the MSCI ACWI IMI and 0.28 per cent of the MSCI EM IMI, as per the data of 14 December.
MSCI will be issuing a separate announcement if it receives any update after 29 December (4:00 pm ET) in connection to the deletion of securities. The announcement will be duly made by MSCI after evaluation and implementation “at a date-to-be-determined”.
Impact of removal
According to feedback compiled from over a 100 US and non-US-based market participants, the removal of Chinese securities may significantly impact the investment processes of global investors. The order will certainly affect the investability rationale from the perspective of global institutional investors.
The substantial presence of the US-based financial entities including the commercial banks, custodians, and broker dealers within their chain of financial intermediaries would certainly restrict their respective abilities in transacting in the securities that are being impacted by the order, the non-US market participants consulting on order noted.
