MSCI Inc.
MSCI 1.38%
it will strip its stock indexes of seven Chinese companies that the U.S. government says will help the Chinese military, including the country’s largest chip maker and a major producer of surveillance equipment.
The measure, which will take effect at the close of business on Jan. 5, follows similar actions by other benchmark vendors, including the FTSE Russell and S&P Dow Jones indices. It will affect ten securities traded in Hong Kong, Shanghai or Shenzhen.
Last month, President Trump signed an executive order banning Americans from investing in 31 Chinese companies that the U.S. Department of Defense says they supply and support military, intelligence and security services. of China.
In a statement after U.S. markets closed Tuesday, MSCI said its list only includes securities issued by companies that are explicitly listed on the order, but not by subsidiaries or affiliates.
This means that some of the biggest stocks could have been affected by the order, such as China Mobile Ltd.
, which has a market value of about $ 117 billion, have been saved and the overall impact on the indices will be limited. FTSE Russell and S&P Dow Jones took a similar approach.
MSCI said the affected shares accounted for 0.04% of its worldwide reversible market index and 0.28% of the equivalent in emerging markets. They include Semiconductor Manufacturing International Corp.
SMICY -4.97%
, The largest chip manufacturer in China and Hangzhou Hikvision Digital Technology Co.
002415 -1.89%
, a surveillance specialist in Shenzhen.
MSCI said it had heard more than 100 market participants and respondents said it would be difficult for international institutional investors to invest in these 10 stocks.
“In particular, non-U.S. market participants noted that the extensive presence of U.S. entities, such as commercial banks, brokers, and custodians, within their chain of financial intermediaries would significantly limit their ability to transact with the securities concerned “. dit.
The technological battle between the US and China has hit TikTok and Huawei and shocked American companies that produce and sell in China. WSJ explains how Beijing pours money into high-tech chips because it wants to be self-sufficient. Video / Illustration: George Downs / The Wall Street Journal
Wednesday in Hong Kong, shares of China Communications Construction Co.
1800 3.08%
, Railway Construction of China Corp.
1186 2.89%
and CRRC Corp.
1766 1.79%
, three of the shares mentioned, fell more than 1% at noon, while the city’s Hang Seng index added 0.8%. Shares in Shanghai of the same companies fell by less than 0.3%.
MSCI will finalize its list on Dec. 30, so it could expand if U.S. authorities name any other companies by Dec. 29.
Write to Chong Koh Ping to [email protected]
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It appeared in the December 17, 2020 print edition as “MSCI Drops Stocks Stocks Stocks”.